Capturing institutional home country conditions for exporting SMEs

Journal of Business Research 64 (2011) 1303–1310

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Journal of Business Research

Capturing institutional home country conditions for exporting SMEs Raluca Mogos Descotes a, Björn Walliser b,c,⁎, Hartmut Holzmüller d, Xiaoling Guo e a

ESSCA School of Management and ESSCA Knowledge Research Center, Paris and Angers, France University of Nancy, ISAM-IAE and CEREFIGE Research Center, Nancy, France c ICN Business School, Nancy, France d TU Dortmund University, Marketing Department, Dortmund, Germany e Department of Marketing, University of International Business and Economics, Beijing, China b

a r t i c l e

i n f o

Article history: Received 1 February 2010 Received in revised form 1 June 2010 Accepted 1 November 2010 Available online 21 January 2011 Keywords: Institutional profile Exporting SMEs Cross-national research Scale development

a b s t r a c t In line with recent developments in institutional theory that indicate institutional settings can explain crossnational differences, this article proposes a measure of the institutional country profile relevant to exporting small- and medium-sized enterprises (SMEs). Combined emic and etic research approaches suggest a scale, derived through in-depth interviews with French and Romanian managers in SMEs and tested with 107 French export managers. The scale is psychometrically sound and supports a three-dimensional country institutional profile of exporting SMEs that comprises regulative, cognitive, and normative dimensions. The institutional profile of a country can complement, if not substitute for, culture as an explanation of export behavior. Furthermore, the proposed instrument can help researchers and managers diagnose countries' exporting strengths and weaknesses, according to their institutional conditions. © 2010 Elsevier Inc. All rights reserved.

1. Introduction International strategic management literature indicates that country-specific institutional settings encode firm behaviors and actions. According to institutional theory, various aspects of the national environment, including social knowledge, cultural norms, rules, and regulations, reflect the institutional characteristics of a given country (Scott, 1995, 2004). Nevertheless, many studies adopt a cultural rather than institutional perspective to explain the export behavior of small- and medium-sized enterprises (SMEs) (Seringhaus, 1993; Souchon et al., 2003). The most widely used bases for explaining differences between countries are Hofstede's (1980) dimensions, despite heavy criticisms of dimensional concepts of culture in the past decade (Jacob, 2005; Orr and Scott, 2008). Cross-national differences in SMEs' exporting behavior rely, at least partly, on a set of institutions that guide and constrain organizations within each national economy, such that “a country's institutional profile can serve as a viable alternative for exploring broad country differences” (Busenitz et al., 2000, p. 1000). This observation holds especially true in the modern business context of intense globalization and innovation, where countries' institutional arrangements foster firms' business development (Hatchuel et al., 2005; Scott, 2004). Bartholomew (1997) and Mahmood and Rufin (2005) articulate how national institutional patterns, such as access to research and educational institutions or the government's propensity to invest in technological development, determine the emergence of innovations in a country and spur economic ⁎ Corresponding author. ISAM-IAE, 13, rue Maréchal Ney, 54 000 Nancy, France. E-mail address: [email protected] (B. Walliser). 0148-2963/$ – see front matter © 2010 Elsevier Inc. All rights reserved. doi:10.1016/j.jbusres.2010.12.023

development. By extension, differences in national institutions' support for internationalization may induce differences in the management of exporting SMEs' activities across countries. Inspired by Scott's (1995) conceptualization of institutional “pillars,” Kostova (1997) introduces a three-dimensional institutional country profile, according to which national governmental policies (regulatory), widely shared social knowledge (cognitive), and value systems (normative) affect domestic business activity. Kostova (1997) and cognitive psychologists (see Galambos et al., 1986; Walsh, 1995) also emphasize that institutional profiles cannot be generalized; they are domain specific. Various instruments measure institutional profiles in the domains of quality management (Kostova, 1997, 1999) and entrepreneurship (Busenitz et al., 2000), yet no such measure applies to exporting. Using Kostova's (1997) threefold framework, this study conceptualizes country institutional profiles for exporting SMEs by specifying the roles of regulative, cognitive, and normative dimensions for exporting SMEs' international development. This study also describes the emic and etic steps necessary to develop a measurement instrument, with related conclusions, implications, and limitations, as well as further research avenues. 2. Institutional profile for exporting SMEs Kostova (1997) introduces the concept of a country-specific institutional profile to conceptualize and measure relational and regulatory country-level characteristics that affect organizational development. Both organizations and the individuals who compose them reflect the social environment in which they evolve. Parsons (1960) uses the term “social norms” to refer to the social environment;

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March and Simon (1958) use “cognitive and normative structures.” Regardless of the terminology, these scholars agree that social environments affect organizational behavior, consistent with an institutional perspective (see Meyer and Rowan, 1991) that highlights the importance of cognitive settings in a given country and provides a broader view of the dimensions that affect business behavior in different national contexts. Assuming interrelations occur among the three dimensions of the institutional profile and between the institutional profile and certain cultural elements (e.g., Hofstede, 1980), the present study embraces Kostova's (1997) view that the regulatory, cognitive, and normative dimensions are conceptually and empirically distinct. The regulatory dimension refers to laws, regulations, and written rules that promote or restrict certain behaviors. For exporting SMEs, this dimension entails laws, regulations, and governmental policies that support exporting SMEs and facilitate or hamper efforts to acquire resources to sustain internationalization. For example, governments might create and support various programs at the national and regional levels that can enhance training and provide information or financial aid (Gencturk and Kotabe, 2001; Reynolds, 1996). The cognitive dimension of the institutional profile captures cognitive structures, such as heuristics, mental models, social knowledge, and behavioral patterns shared by members of a given country (Scott, 1995). In the specific domain of exporting, this dimension extends to the company's skills and knowledge related to selling abroad. As practices and knowledge become institutionalized, information becomes part of the shared social knowledge (Busenitz and Barney, 1997; Busenitz et al., 2000). Whereas in some countries, highly developed knowledge about export regulations and procedures gets disseminated among companies and citizens, in other countries, firms and managers have difficulty understanding the basic steps required to begin exporting. The normative dimension reflects general social norms, values, beliefs, and assumptions about the ways humans should behave in a given society. For exporting SMEs, the normative dimension captures the degree to which a country's residents value exporting activities. Researchers in the field of international entrepreneurship also argue that values, beliefs, and norms in a certain country affect the entrepreneurial orientation of that country's residents (e.g., Busenitz and Lau, 1996; Busenitz et al., 2000; Knight, 1997; Tiessen, 1997). According to the value system in a country, exporters receive more or less appreciation for their initiative to expand their business activities beyond national borders. Although most popular measures of countries' normative environment rely on Hofstede's (1980) cultural dimensions, this study instead adopts Kostova's (1997, 1999) and Busenitz et al. (2000) approach, which stresses the importance of developing a domainspecific measure that reflects the institutional profile of exporting SMEs.

3. Steps in measurement development Two different approaches, etic and emic (Pike, 1967), are available for investigating cross-national differences. The emic approach focuses on studying a construct within a specific national setting to understand this construct the same way people within the specific national setting would. This approach provides a rich, thorough description of the construct within a single national setting but restricts cross-national comparisons (Church and Katibak, 1988). The etic approach instead develops understanding by comparing a construct across national settings using predetermined common characteristics (stable across national settings). When embracing an etic approach, researchers risk an inability to capture all national setting-specific (emic) aspects of the construct, relative to a particular environment. Thus, the two approaches are complementary and equally important for cross-national research (Singelis, 2000).

This study combines the two perspectives in a three-step investigation. First, a preliminary qualitative investigation adopts an emic-oriented perspective to gain insights into the ways managers view cross-national differences that foster or hamper SMEs' international expansion, as well as generate items that can capture the hypothesized three-dimensional institutional profile of exporting SMEs. To avoid ethnocentric tendencies, this preliminary research includes two countries with diverse institutional conditions, France and Romania. Institutional environments likely vary with levels of economic development, which commands the use of countries with different developmental levels. Moreover, previous studies suggest that the overall stability and extent of corruption of a political regime (Doh et al., 2003; Johnson et al., 2000) influence companies' strategies and development. Corruption is prevalent in many Eastern European countries, so Romanian companies' perceptions of the regulatory environment likely differ from those of their Western counterparts. This heterogeneity can reveal whether, in two different institutional environments, a threefold structure of the institutional profile of exporting SMEs emerges. The familiarity of the research team with the languages and institutional environments of both countries provided another reason to choose these countries. Second, a pilot study with an etic (comparative) approach in Romania pretested and purified the scales developed in the first step across both national settings. Third, a study with an etic approach in France confirmed the measurement validity of the scales tested in the Romanian context. 3.1. Preliminary research In-depth interviews involved ten managers from Romanian exporting SMEs and eight managers from French exporting SMEs. The selected firms, operating in the steel and textile industries, represented different sizes and levels of export involvement and international experience. The exploratory nature of this research stage made purposive sampling, with the goal of high levels of heterogeneity, suitable to gain preliminary insights into the issues of interest and generate relevant measurement items (Coviello and Jones, 2004; Souchon and Diamantopoulos, 1999). With the focus on emic aspects in the respective countries, sample equivalence was not an issue of concern. Table 1 summarizes the profiles of the managers interviewed and their companies. In the interviews, Romanian managers expressed doubts about governmental support for SMEs' internationalization, because “One cannot say that our government supports us to export. I have the impression that abroad the situation is different” (RO4). The SMEs' managers also seemed to lack confidence in governmental bodies because of corruption. According to another manager, “The major difference is that our government is still corrupt. The governmental aids for exporting are not allocated to those who need them; they are given to who ‘pays’ for them” (RO6). Nine of the ten companies referred to the lack of support by Romanian authorities for exporting SMEs. Similar to their Romanian counterparts, French managers were not entirely satisfied with government support of internationalization. French SMEs' managers also suggested that the distribution of governmental support was uneven across the same industries in various regions of the country. The perceived inferiority of the Romanian companies in international experience and knowledge compared with Western European competitors appeared frequently in the Romanian interviews. Testimonies related to the cognitive dimension of the institutional environment and reflected the interviewees' knowledge and qualifications with regard to the development of export activities. The interviewees systematically mentioned the international experience of foreign companies: “Undoubtedly they have more experience, and experience means know-how. They have been exporting since the Second World War. We are beginners.... At the same time, I have the impression they are less skilled in foreign languages than we are in

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Table 1 Profiles of Romanian and French managers interviewed and their companies. Interviewee

Industry

Interviewee position

Gender/field of studies

Company size

Number of export countries

Main export market

Percentage of foreign sales

Export experience of company (years)

RO1 RO2 RO3 RO4 RO5 RO6 RO7 RO8 RO9 RO10 FR1 FR2 FR3 FR 4 FR5 FR6 FR7 FR8

Textile Textile Steel Steel Steel Steel Steel Steel Steel Steel Textile Textile Textile Textile Steel Steel Steel Steel

MD Production manager MD MD MD MD MD Commercial manager MD Production + CEO Commercial manager MD Financial manager Export manager Commercial manager Export manager MD MD

M/Eng F/Eng M/Eng M/Eng M/Eng M/Eng M/Eng M/Bus F/Eng+Bus M/Eng + M/Eng F/Lang M/Eng M/Bus M/Bus M/Eng M/Eng F/Bus W/Eng

250 100 60 94 60 140 55 4 35 178 100 120 284 6 70 120 32 150

8 3 4 4 4 1 2 3 2 1 6 3 45 12 5 65 10 75

Germany Italy Holland Holland Germany France Serbia Turkey Holland France Belgium Germany Germany U.S. Germany U.S. Germany Holland

80 100 100 70 80 3–5 5 72 100 100 10 5–10 45 55 20 25 45 25

40 4 6 9 9 2 3 5 11 10 10 10 15 30 12 25 45 25

Notes: MD = managing director, Eng = engineering, Bus = business, Fr = French interviewee, Ro = Romanian interviewee.

Romania. I have the conviction that one day we will be even better than they are” (RO10). Only one of the French interviewees referred to the cognitive dimension of the institutional environment of SMEs, noting the lack of international experience among Eastern European competitors. French interviewees instead referred mainly to general exporting knowledge, such as the need for product adaptation and market expectations. Only two Romanian interviewees mentioned elements related to the normative dimension of the institutional environment, for example, “In the news our government is praised all the time: ‘… exports are dynamic and increasing over these last years, we achieved our goals....’ They are proud of exporters, but they do not help us” (RO5). French interviewees did not spontaneously mention such elements. In general, the in-depth interviews identified facets of the threedimensional structure of the institutional profile of exporting SMEs. Managers' perceptions of environmental conditions in their home countries included regulative, cognitive, and normative aspects. On the basis of these interviews, as well as prior literature and discussions with other researchers, this research therefore develops an etic pool of potential measures of each dimension (see Table 2). For the regulatory dimension, five proposed items relate to governmental support and aid for exporting SMEs. Five items related to the cognitive dimension focus on information acquisition knowledge, product

adaptation needs, and more general export management activities. Finally, five items attempt to capture the normative dimension of the institutional profile of exporting SMEs by noting society's admiration for exporting activities and belief that exporting is proof of professional performance. After being developed initially in French, the items and research instrument underwent back-translation, as suggested by Brislin (1981), from French to Romanian and back again, to ensure translational equivalence. 3.2. Pilot study in a contrasting institutional context The second step subjected the questionnaire developed from the emic process to a protocol-based pretest with several Romanian and French export decision makers, to ensure appropriate understanding of the items. The pretest also included a heterogeneous convenience sample of Romanian and French exporting SMEs from various industries. The 2006 data collection spanned two Romanian counties, Brasov and Covasna. Companies paying value added tax on export sales at the Regional Financial Inspection Center received the questionnaires; these exporters participated in the study completely voluntarily by filling in a one-page questionnaire while waiting in line. All approached respondents agreed to participate, which provided 46 usable questionnaires.

Table 2 Results of exploratory PCA in the pilot study. Items (Likert scale, 1–7, “totally disagree” to “totally agree”)

Mean Standard deviation PC1 PC2 PC3

Governmental organizations in Romania assist SMEs in exporting. (regulative1) The government provides financial aid to help small businesses export. (regulative2) The government provides support programs for SMEs willing to export. (regulative3) At both local and national levels governmental bodies provide special support for SMEs willing to internationalize. (regulative4) The government assists small businesses in starting to export even if they have previously failed. (regulative5) In Romania, exporters are admired. (normative1) In this country, exporting is a proof of good performance. (normative2) In Romania, exporting is synonymous with success. (normative3) In this country, exporting is viewed as a route to success. (normative4) People in this country greatly admire exporting companies. (normative5) Most exporters know where to find information about foreign markets for their products. (cognitive 1) Exporters know where to search for foreign customers. (cognitive 2) The majority of export companies know how to find out if their products are adapted to foreign markets. (cognitive 3) In this country, exporters are able to deal with the high levels of uncertainty characterizing foreign markets. (cognitive 4)

3.52 3.41 3.07 3.74 3.72 4.59 4.78 4.78 4.91 4.50 4.33 4.52 3.54 4.26

1.56 1.57 1.52 1.62 1.51 1.30 1.44 1.50 1.45 1.32 1.30 1.27 1.29 1.32

.89 .93 .86 .90 .94 .86 .92 .90 .92 .85 .88 .79 .61 .83

Percentage of variance explained: 78.91%; KMO = .69; Cronbach's α regulative dimension (PC1) = .95; Cronbach's α normative dimension (PC2) = .94; Cronbach's α cognitive dimension (PC3) = .79.

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The pretest sample consisted of 33 SMEs from the textile industry and 13 SMEs from various other industries (metal, transport, food). On average, exports accounted for 73% of the total revenues of these companies. The purpose of the pretest was to gain additional insights into the factorial structure and composition of the scales, so the use of a representative sample was not a major concern. The small absolute sample size prompted assessments of the estimation stability of the parameters based on a bootstrap procedure, as suggested by Tenenhaus et al. (2005), using XLSTAT PLSPM software (partial least squares [PLS] path modeling). To run PLS path modeling analysis, researchers must have approximately ten times as many observations as the number of the items of the reflexive or formative construct containing the most important number of manifest variables and some scholars suggest samples at least five times greater are sufficient (Fornell and Larcker, 1981). The exploratory interviews with export managers indicated that the regulative, cognitive, and normative dimensions of exporting SMEs' institutional profile should be reflective constructs. Interviewees mentioned several independent ideas related to one or more of the three dimensions, and previous studies also use reflexive measurement scales for institutional profiles in the contexts of quality management (Kostova, 1999) and entrepreneurship (Busenitz et al., 2000). Established scale development procedures supported assessments of the psychometric properties of the scales (e.g., Churchill, 1979; DeVellis, 1991; Nunnally and Bernstein, 1994). A principal components analysis (PCA, Varimax rotation) revealed three components with eigenvalues greater than unity, explaining 78.91% of the variance. The first two components regrouped the five items relative to the regulative and normative dimensions, whereas the third component contained only four of the five cognitive items, with a low loading and weak communality of the item, “Generally, companies are aware of the procedures to follow before actually beginning exporting activities” (b .40; DeVellis, 1991). The meaning of this item differs slightly from that of the other four items; whereas this item refers to exporting knowledge prior to selling abroad, the other four items refer to generalized and ongoing export knowledge. After eliminating this item, a second PCA with Varimax rotation yielded the results in Table 2. The identified three-factor solution explains 78.91% of the variance in the data. Horn's (1965) parallel analysis indicated the optimal number of factors. Increasing consensus finds Horn's parallel analysis (PA) and Velicer's minimum average partial (MAP) test — adjusting for the effect of sampling error (Zwick and Velicer, 1986) — superior to Kaiser's criteria, the scree test, and Bartlett's test methods (O'Connor, 2000; Wood et al., 1996; Zwick and Velicer, 1982, 1986). Velicer et al. (2000) compare PA, MAP, and Kaiser's eigenvalue criterion and conclude that PA is the most accurate approach. Horn's PA suggests that the first three eigenvalues from the actual data are greater than the corresponding first three eigenvalues of the 95th percentile (and mean) random data. The fourth eigenvalue is smaller, so three factors should be retained (Horn, 1965). The first factor explains 36.31% of the variance and captures five items pertaining to the regulative dimension. Four items that capture the cognitive dimension reflect the second factor and explain 24.43% of the variance. Finally, the third factor explains 18.16% of the variance and comprises the five items initially suggested for the normative dimension. Communalities of the items exceed .65; this result is satisfactory for exploratory purposes. The results from the bootstrap procedure to assess parameter stability indicate that despite the small sample size, the parameter estimation is stable (estimated means are close to the values obtained from the study sample), and the results are statistically significant (critical ratios greater than 1.96), in line with Arbuckle (1997).

3.3. Main survey The questionnaire respondents and managers involved in the protocol approach revealed some redundancies among the items. The 14 pretested etic items (see Table 2) dropped to 9, on the basis of discussions with 12 Romanian and French SME managers. Item selection reflected the items' statistical contribution to the underlying dimension of the institutional profile, as well as aspects of conceptual order. The final scale was part of a more comprehensive survey sent to 624 French managers in exporting SMEs in the steel industry. Only companies with the following criteria appeared in the sample: (1) size ranging from 11 to 250 employees, (2) exporting accounted for more than 10% of total turnover, and (3) producers of steel products. The analysis did not retain micro firms, because previous studies suggest their environmental perceptions are specific and differ drastically from those of larger firms (Gueguen, 2001). Furthermore, previous French studies on exporting SMEs suggest retaining companies that realize more than 10% of total turnover from exporting, because companies less internationally involved have a low likelihood of participating in surveys (e.g., Walliser and Mogos Descotes, 2004). Companies in the sample came from the DIANE database, an exhaustive European database (https://diane.bvdep.com) that provides mandatory financial information about French companies. Moreover, this database includes the names of managing directors, the respondents targeted by this research, who play key roles in fostering firms' international development (e.g., Bijmolt and Zwart, 1994; Halikias and Panayotopoulou, 2003; Leonidou, 2004). The questionnaire, administered in four waves, accompanied a cover letter addressed to the managing director that explained the aim of the research and a prepaid response envelope. Of the 120 questionnaires collected, 107 were usable (response rate = 19.10%). Several follow-up attempts revealed some information about nonresponse cases. Some companies no longer exported or suffered time pressures; others' company policy did not allow survey participation. None of the reasons suggested nonresponse behavior reflected characteristics that could affect findings related to the substantive research issues (Souchon and Diamantopoulos, 1999). The assessments of the psychometric properties of the three scales relied on established statistical measurement development procedures (e.g., Churchill, 1979; DeVellis, 1991; Nunnally and Bernstein, 1994). Regarding dimensionality, a PCA with Varimax rotation was applied to all items composing the three dimensions of the exporting SME institutional profile, to provide initial support for the supposed threefold classification. Table 3 summarizes these results. Again according to Horn's (1965) parallel analysis, three factors characterized by eigenvalues greater than unity emerged, explaining 75.79% of the variance. The first factor explains 29.07% of the variance and includes the three items pertaining to the regulative dimension. The three items that capture the cognitive dimension cover the second factor, which explains 26.18% of the variance. Finally, the third factor explains 25.34% of the variance and comprises the three items of the normative dimension. The magnitudes of the items' communalities are substantial, ranging from .67 to .90. For each dimension, an item analysis revealed that each item correlated with the sum of the remaining items (item-to-total correlations) and with every other item (interitem correlations). All items were statistically significant at p b .001. All three scales appear highly reliable, because their Cronbach's alphas equal or exceed .85. A confirmatory factor analysis (CFA) performed with LISREL 8.51 tests the scale's convergent and discriminant validity. The fit indexes show a good fit of the measurement model to the observed data: χ224 = 43.99 (p b .05), goodness-of-fit index = .91, adjusted goodnessof-fit index = .84, root mean square error of approximation = .08, confirmatory fit index = .97, normed fit index = .93, nonnormed fit index = .95, and square root mean residual = .07. Fig. 1 illustrates the CFA results.

R. Mogos Descotes et al. / Journal of Business Research 64 (2011) 1303–1310 Table 3 Results of exploratory PCA in the main study. Items (Likert scale, 1 to 7 from “totally disagree” to “totally agree”)

Mean Standard PC1 PC2 PC3 deviation

Governmental organizations in France assist SMEs in exporting. (R1) The government provides financial aid to help small businesses export. (R2) The government provides support programs for SMEs willing to export. (R3) In France, exporters are admired. (N1) In this country, exporting is a proof of good performance. (N2) In France, exporting is synonymous with success. (N3) Most exporters know where to find information about foreign markets for their products. (C1) Exporters know where to search for foreign customers. (C2) The majority of export companies know how to find out if their products are adapted to foreign markets. (C3)

3.98

1.50

.72

4.42

1.47

.89

4.25

1.39

.90

3.11 3.10

1.35 1.32

.85 .91

3.08

1.35

.85

4.52

1.78

.83

5.23

1.51

.91

4.75

1.47

.85

Percentage of variance explained: 75.79%; KMO = .69; Cronbach's α regulative dimension (PC1) = .85; Cronbach's α cognitive dimension (PC2) = .86; Cronbach's α normative dimension (PC3) = .89.

Except for item R1, “Government organizations in France assist SMEs in exporting,” the factorial contributions of the three dimensions to the corresponding items exceed .7. All items have substantial and significant loadings on their respective factor, t N 1.96. Moreover, the average variance extracted (AVE) values for each dimension (N .6) are well above the recommended threshold of .5 (Fornell and Larcker, 1981), in support of the convergent validity of the three dimensions. Significant positive relationships appear among the regulative, normative, and cognitive dimensions of the institutional profile, but the size of the correlations is moderate. The AVE for each dimension is greater than the squared correlation between each pair of dimensions (r2 b .17), which implies that a single latent variable cannot capture the items pertaining to the threefold classification (Fornell and Larcker, 1981). The appropriateness of a three-dimensional institutional profile receives further support from the exploratory study and previous PCA analysis. In conclusion, this study fulfills the discriminant validity criteria for the scales.

.56

R1

.36

R2

1307

The results of the CFA also indicate composite reliability, according to Jöreskog's Rhô. This coefficient is less sensitive to the number of items used to capture a reflective construct and better adapted to structural equation modeling (SEM) than Cronbach's alpha (Roussel et al., 2002). Table 4 presents the composite reliability (Cronbach's alpha and Jöreskog's Rhô) and convergent and discriminant validity measures. The threefold structure of the institutional profile is reliable and valid; thus, the CFA results suggest that the proposed scale is psychometrically sound. The nomological validity check linked the scales to theoretically relevant constructs from the literature review (Peter, 1981). The present research largely relies on new grounds, and therefore, literature on exporting SMEs provides little empirical support for the influence of the institutional profile on exporting behavior. However, conceptual reasoning implies that companies that score high on the normative dimension should exhibit a high degree of exporting. If SME managers perceive exporting as synonymous with success, they should sense a motivation to develop the international activities of their companies. The normative dimension and export implications (i.e., percentage of export sales) thus seem obviously related, yet the causal direction of this relationship is difficult to establish and considered recursive for this research. Furthermore, companies scoring high on the cognitive dimension likely benefit from developed export marketing capacities. If SME managers believe that most SMEs in France know where to find relevant export information and meet foreign clients' expectations, their companies should invest in those capabilities. The qualitative investigation provides some concomitant evidence. The difficulty of establishing a direction of causality for this relationship again arises; however, the cognitive dimension of the institutional profile of a company should relate positively to the level of export marketing competences of SMEs. Finally, the regulative dimension involves SMEs' trust in the support of governmental institutions for exporting. In France, Chambers of Commerce and Industry (CCI) exemplify such government-led institutions. A recent study revealed CCI offer a preferred source of governmental export information for French SME managers (Mogos Descotes, 2009). Therefore, a positive and significant correlation is likely between French managers' appreciation of governmental support for exporting and the perception of CCI as a rich and valuable information source (i.e., quality and quantity of information provided, ease of contact).

.66 .80

Regulative

.98 .04

R3

.33

N1

.02

N2

.42 .82 .99

Normative

.26

.79 .38

N3

.31

C1

.12

C2

.27 .83 .94

Cognitive

.71 .50

C3

Notes: All parameters are statistically significant at α = .05 and are completely standardized solutions. Fig. 1. CFA of scales of institutional profile of exporting SMEs.

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Table 4 Scale validity and reliability, convergent, and discriminant validity. Dimensions

Reliability

Convergent validity Discriminant validity

Cronbach's α Rhô AVE Jöreskog

Correlation between factors Reg

Regulative (Reg) .85 Normative (Nor) .89 Cognitive (Cog) .86

.86 .90 .87

.67 .75 .69

Nor

Cog

1 .42 1 .26 .27 1

Bootstrap procedures and PLS path modeling tested the three relationships. Even though PLS path modeling generally assesses unidirectional influences between constructs, another use involves evaluating the stability of recursive relationships in simple correlation analyses, because correlation coefficients between two given constructs equal the regression coefficients generated through simple regressions (ordinary least squares regressions). The measure of perceptions of the richness of CCI as an information source used Ramangalahy's (2001) scale. As expected, the normative dimension correlates significantly and positively with the perceived richness of CCI as an information source regarding export markets (Beta = .32, p b .001). The mean of the standardized regression coefficients obtained through bootstrap estimations is slightly higher than the one for the main study's sample (Beta bootstrap = .34). The critical ratio (CR) suggests the relationship is stable through the generation of random samples (CR = 3.55). The normative dimension is significantly and positively correlated with the export involvement of SMEs (Beta = .45, p b .001), and the estimation is stable (Beta bootstrap = 47; CR = 9.20). Finally, the level of export marketing competences of SMEs, measured using Ramangalahy's (2001) scale, shows that the cognitive dimension correlates significantly and positively with the level of export marketing competences of SMEs (Beta = .36, p b .001). The estimation again appears stable (Beta bootstrap = 40; CR = 4.78). In addition, according to Cohen (1992), the sample size necessary for assessing three simple correlation analyses, assuming a medium effect size (f2 = .15; R2 = .13), a significance level (α) of .001, and a desired power (1 − β) of .80, is 108 observations. Thus, the sample size of the study appears appropriate for testing the nomological validity of the scale. Further support comes from a series of t-tests that reveal, with the exception of R1 (“Governmental organizations in France/Romania assist SMEs in exporting”; F = 2.81, p b .05), the mean differences between the French and Romanian samples for the items of the regulative, normative, and cognitive dimensions are all significant at the .05 level. Romanian managers show less appreciation for the regulative dimension, score lower on the cognitive dimension, and score higher on the normative dimension than French managers. In addition, SMEs in the French institutional environment appear more skilled in terms of foreign market-related knowledge management. 4. Conclusions, limitations, and further research This research provides empirical support for the three-dimensional nature of country institutional profiles of exporting SMEs, comprising regulative, cognitive, and normative dimensions. The measure to capture the threefold structure is psychometrically sound and combines emic and etic research approaches. The first emic-oriented study provides additional insights into the ways managers view the influence of institutional environmental differences on the strategies and development of exporting firms in two highly different cultural contexts, namely, France and Romania. The results of the qualitative studies provide a broader conceptual as well as empirical basis for

developing a robust, generalizable measurement instrument (Ronen and Shenkar, 1988). Nevertheless, this study is just a first step in measuring the country institutional profiles of exporting SMEs. Replications of the scale should establish the stability of its psychometric properties and generalizability to other settings (e.g., different countries, industries, market segments). This study makes at least two noteworthy contributions to literature on exporting SMEs. First, though the influence of national culture on the exporting business environment is indisputable, culture alone cannot explain business behaviors fully (Busenitz et al., 2000). The institutional profile of a country can serve as a viable complement, if not alternative, in explanations of export behavior. Culture should not appear systematically as a single, dominant conceptual argument to explain national differences in exporting (Nakata and Huang, 2004; Singelis, 2000). The generated scales provide a complementary approach to testing cross-national differences with respect to the export activities of SMEs. Additional studies can determine the conditions in which a cultural perspective is more appropriate than an institutional one or if both perspectives can be integrated into competing explanations. Second, the three dimensions of the institutional profile relate to different aspects of export activities, and thus, the proposed instrument may help researchers and managers compare countries' exporting strengths and weaknesses. The dimensions might explain why companies from certain countries achieve an export advantage. For example, companies in countries with a high cognitive dimension score likely have structures that foster information and knowledge management. Such structures help the companies identify barriers to overcome before expanding into new markets (Rondinelli and Kasarda, 1992). Empirical evidence suggests that comprehending the institutional profile of international companies is important; failing to do so in foreign host countries leads to unforeseen costs (Orr and Scott, 2008). In addition, the normative dimension relates to managerial commitment to exporting. In countries with high scores on this dimension, managers likely allocate additional effort and resources to exporting activities to gain social recognition and admiration. High scores in the regulatory dimension reflect export support programs and a general positive appreciation of government assistance for internationalization. These scores signal a strong flow of information between government bodies and SMEs, and perhaps even trust in public support competence. Companies in countries with a clearly established support policy should make more extensive use of public export training and financial aid. Because institutional settings lose some meaning when they generalize across a broad set of issues (Kostova, 1997; Walsh, 1995), researchers should consider the similarities and differences between the proposed measurement instrument and existing scales in the domains of quality management (Kostova, 1997) and entrepreneurship (Busenitz et al., 2000). All three scales focus on company growth and competitiveness. Quality management (Kostova, 1997) and entrepreneurship (Busenitz et al., 2000), similar to exporting (Gencturk and Kotabe, 2001), boost economic growth at both micro and macro levels. Interrelations among all three scales are likely, because extant measures focus on issues that influence export activities. For example, quality management and entrepreneurial orientation capabilities may enable SME managers to succeed in foreign markets. Exporting also requires a proactive market approach and risk-taking propensity (Knight, 1997; Lumpkin and Dess, 2001). Yet these three scales are distinctive and clearly refer to different types of business behavior and institutional forces. While all three rely on a three-fold (cognitive, normative and regulatory) institutional structure, the social actors, perceptions and policies regarding entrepreneurship, the rules, norms, values and institutional bodies shaping quality perceptions, and the institutional settings influencing export behavior are intrinsically different. In other words, it is not because entrepreneurs are admired in a country that exporters do automatically enjoy the same esteem.

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As with all studies breaking new ground, this research has several limitations, in particular those related to the size and quality of the samples. Only companies from a single industry appeared in the final part of this research. Exporting firms are more likely to furnish information about the regulatory and cognitive dimensions than are non-exporters, but exporters may encounter difficulties evaluating the normative dimension of the institutional environment objectively, because they prefer their own internationalization path. Data collection across several markets, involving companies both with and without exporting activities, would be a promising step for further study. This extension could evaluate the cross-national stability of the proposed measures, as well as open the way to testing the extent to which institutional environments relate to other cultural and societal constructs. Both France and Romania are members of the European Union (EU); additional work should replicate this study outside this zone. For example, Asian and American countries differ considerably in their institutional conditions, general levels of economic development (infrastructure), level of corruption, type of political regimes, and value systems. Interestingly, the two existing institutional profile scales, developed by Kostova (1997) in quality management and by Busenitz et al. (2000) in entrepreneurship, prove to be psychometrically consistent in quite diverse environments. For instance, Kostova's (1997) scale is valid in six European countries, in Canada, the US, Argentina and Malaysia. The scale developed by Busenitz et al. (2000) has been tested in five countries of the EU zone plus US. While factor loadings are clearly not identical across these countries, they are not significantly different between culturally homogeneous countries such as for example Italy and Spain or Sweden and Norway. Thus, from an etic-perspective, the core structure of the instrument developed in this research should hold in different institutional settings, though some items should be adapted or added to represent regional or local idiosyncrasies. For example, the regulative part of the scale may demand adjustments in regions or countries with higher levels of governmental influence on businesses (e.g., central planning authorities). Despite these limitations, the three dimensions of an institutional profile appear related to several determinants of international performance, including the commitment to exporting (Bijmolt and Zwart, 1994), information acquisition from governmental-based institutions (Donthu and Kim, 1993), and information or knowledge management or training (Seringhaus, 1986). Thus, the institutional profile of a given country may influence the international performance of companies or moderate the relationship between performance and several determinants. In summary, developing a diagnostic tool for institutional profiles offers benefits to academicians and policy makers, as well as managers. First, this instrument represents a viable alternative or complement to the use of cultural dimensions in comparisons of cross-national export behavior. Second, critical evaluations of the three dimensions of a country's institutional exporting profile can help policy makers increase the efficiency of export support and promotion programs. Third, managers should take the institutional environment into account when deciding to enter new markets. When establishing production facilities in foreign countries with the goal of exporting, the institutional export environment is a key factor. An export-friendly institutional environment will benefit the activities of a planned subsidiary.

Acknowledgments The authors thank the editor and reviewers for the kind and constructive guidance as well as insightful comments. The first two authors acknowledge the financial support for this research from the Lorraine Region (“Conseil Régional de Lorraine”) and the ICN Business School.

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