The effects of transfer of marketing methods on export performance: an empirical examination

0969~5931(94)EOOll-9

International Business Review Vol. 3, No. 3, pp. 219-241, 1994 Elsevier Science Ltd Printed in Great Britain. 0969.5931/94 $7.00 + 0.00

The Effects of Transfer of Marketing Methods on Export Performance: an Empirical Examination Aviv Shoham* and Gerald A1baum-f *Technion - Israel Institute of Technology, Haifa, Israel -/-University of Oregon, Eugene, Oregon, USA and IC2 institute, University of Texas, Austin, Texas, USA Abstract - The debate about standardization versus adaptation for foreign markets has received increased attention in the literature since the early 1980s. This increase is due in part to the globalization of markets for many goods and services. Largely ignored in the rhetoric has been the issue of transference of marketing strategies and tactics. This is especially apparent with regards to empirical studies on this issue. The little research that has been done on transference has centered on advertising. This paper extends the research base to other elements of the marketing mix and assesses the relations between these elements and performance. Owing to the friction that exists between headquarters and subsidiaries or foreign intermediaries, this paper proposes that adaptation of strategies enhances performance, whereas transference reduces performance. As such, the study answers Jain’s (Jain, S. C. (1989) Journal of Marketing, Vol. 53, January, pp. 70-79) call for empirical examinations of the relations between adaptation and performance. Key Words -

Marketing Methods, Export Performance,

Transference.

Introduction Export marketing has become a popular research topic. As the study of export marketing has matured, there has been an increase in attention directed to export performance (e.g Bilkey, 1978a,b; Brooks and Rosson, 1982; Cavusgil, 1984; Cavusgil and Nevin, 1981; Kaynak, 1990; Madsen, 1987; Samiee and Roth, 1992). Unfortunately, researchers concerned with export performance have failed to agree on a conceptual or an operational definition of just what export performance is (Madsen, 1987; Shoham, 199 1). Scholars have also been paying increased attention to the issue of global marketing standardization (Levitt, 1983; Samiee and Roth, 1992). Levitt (1983) argues that world markets are becoming more global and homogeneous, implying a necessity to standardized marketing strategies. If such a trend exists, it is believed that firms using standardized strategies should outperform firms using adapted strategies. Reporting on a recent empirical test of this relationship, Samiee and Roth (1992, p. 1) summarize: “However, in the critical area of performance, no difference is observed between firms stressing global standardization and others.”

219

Transfer of Marketing Methods on Export Performance

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393

Closely related to standardization is the transfer of marketing strategies from one market to another, Because transference and standardization appear to be closely related, they have been used interchangeably (e.g. Jain, 1989). In this study, our concern is with transference - the extent to which marketing activities are changed in foreign markets. Transfer can be viewed as being on a continuum ranging from total transfer to no transfer at all (or adaptation). The major purpose of this paper is to report on a study examining the relationships between the transfer of marketing activities and methods and export performance. The study examines the issues from the perspective of mostly small- and medium-sized firms located in Denmark, a country to which foreign markets and exports are very important. Thus, the findings reported here are important and relevant to firms in similar markets. Prior research on the transfer phenomena has been concerned primarily with advertising and marketing communications. Dunn (1986) used case studies to examine the transfer of successful domestic advertising campaigns to foreign markets. This was followed by a laboratory experiment testing potential factors that affect the success of advertising campaigns’ transference (Schleifer and Dunn, 1968). Later, Dunn (1976) conducted a study on the transfer of marketing strategy, which in reality was concerned with promotional strategy. Killough (1978) studied advertising transference by conducting depth interviews with more than 60 senior managers. Two articles made important conceptual contributions to the transference issue. Sheth (1978) discussed eight advertising transference strategies based on three dimensions: (1) the expectations (i.e. benefits expected) people use to evaluate a product class; (2) the mechanics of encoding and decoding of communications as reflected in the media; (3) the “silent language”, as used in the background for advertising messages. In contrast, Keegan (1969) proposed five strategic alternatives for expansion into foreign markets on the basis of the extension or adaptation of the product and communications variables. In the next section of this paper, theoretical bases underlying transferability of marketing activities and strategies are presented. This is followed by the research propositions of the present study. Finally, the results of an empirical study conducted in Denmark and designed to examine the propositions are presented and discussed. Theoretical Bases Two micro-economic theories are proposed as the bases underlying a company’s transfer of marketing strategies to foreign markets. Both economies-of-scale and price discrimination (Porter, 1980, 1985, 1986) help explain how transference might or might not lead to improved performance. It is assumed that firms are profit maximizers. As such, they try to minimize costs and economies-of-scale is a desirable goal. The quest for economies-ofscale leads to transference of marketing strategies since transferred strategies result in scale economies. Additionally, firms try to maximize revenue, so price discrimination between markets is desirable. To the extent that prices

221 differ between two markets, transference of at least the price component of the marketing strategy is not feasible by definition. If a firm can discriminate in prices, it might also need to change other elements of the marketing mix to optimize its positioning in the host market. In summary, the two theories lead to competing normative conclusions, at least with regard to pricing strategies. The marketing discipline uses these theories to derive strategies based on segmentation and positioning (Kotler, 1991; Samiee and Roth, 1992). Selecting and targeting the largest possible markets facilitates standardized positions resulting from transference and leading to economies-of-scale. Positioning facilitates price differentials across target markets based on price discrimination. Extended to global marketing, the major question becomes whether cross-border, global, and homogeneous sub-markets are emerging (Levitt, 1983). If they are, then transference across national borders becomes a viable strategic option (Schneeweis, 1985). Even then, transference may not be the optimal strategy in the profit-maximization sense (Samiee and Roth, 1992). To the extent that adaption can lead to increased quantities or prices by more accurate positioning, transference will be sub-optimal even in globalizing markets. If such markets are not emerging, or if their importance is marginal, then price discrimination and positioning would suggest adaptation (i.e. non-transference) as a preferred strategy (Piercy, 1981; Walters, 1989; Walters and Toyne, 1989). The strength of the argument for standardization is weakened further by two other arguments: the needforflexibility and the theory offriction. Taking advantage of local market conditions to develop marketing strategies might depend on several organizational characteristics. The strategy literature suggests that flexibility might be such a characteristic (Fiegenbaum and Karnani, 1991; Stewart, 1992; Woo and Cooper, 1981). Additionally, prior research on transference of advertising and promotion advocates changes from the original market, which are based on flexible adjustments in strategies across markets (Dunn, 1966, 1976; Killough, 1978; Schleifer and Dunn, 1968). It is not surprising, then, that researchers in international marketing advocate some level of adaptation (e.g. Boddewyn et al., 1986; Buatsi, 1986; Wills et al., 1991). This may be the reason for the call for mass customization (Westbrook and Williamson, 1993), which is becoming typical for Japanese competitors at this time (Stewart, 1992). The general proposition of this study is that firms that do not transfer outperform firms that transfer strategies. The theory underlying this rational might be termed the theory offriction (Wiechmann and Pringle, 1979). Its basic premise is that the friction between the home and host markets is a major problem for multinational and exporting companies. This friction exists between headquarters and subsidiaries in the case of multinationals or between the headquarters and the channels in foreign markets in the case of exporting (Kashani, 1989; Ohmae, 1989). In addressing strategies for taking a product across national borders, van Mesdag (1987, p. 71) refers to “constraints abroad . . . [which] arise from different cultures which are rooted in history, education, economics, and legal systems”. Hill and Still

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(1984) refer to the changes required by cultural differences as “optional product changes”. Changes in the marketing mix arise not only from cultural differences between home and host markets. Other obstacles to transference include: (1) rules and regulations in the foreign market (Buzzell, 1968; van Mesdag, 1987); (2) measurement units and package sizes (Hill and Still, 1984); (3) physical and economic environments (Buzzell, 1968; Jain, 1989); (4) marketing institutions (Buzzell, 1968); (5) industry characteristics (Buzzell, 1968; Jain 1989). Managers of foreign subsidiaries and of channels of distribution are closer to the market than managers at headquarters. They feel that they understand the market better than their counterparts and can best adapt strategies to account for the obstacles to transference discussed above. Driven by the need for economies-of-scale, managers at headquarters, in many cases, attempt to impose centralized strategies that are transferred from other markets. These competing forces create friction. This might be the reason why Sorenson and Wiechmann (1975) argue that multinational companies should standardize the process leading to the development of strategies, rather than the strategies themselves. The same explanation probably underlies Quelch and Hoff’s (1986) call for customizing global strategies. The constant friction between managers in different markets, driven by the conflicting needs to maximize economies-of-scale and to adapt to local markets, may doom any attempt to transfer marketing strategies and activities. Bartlett and Ghoshal (1986) advocate an expanded role for foreign subsidiaries in suggesting ways to adapt marketing strategies. The role of such subsidiaries is especially critical when the strategic importance of the local environment or the competence of the local organization are high (Jain, 1989). Allowing the foreign operation to have an expanded role can help in offsetting resentment of distant home-office policies (Gestetner, 1974). It also increases the probability that some export obstacles will be reduced or eliminated. In sum, price discrimination, the need for strategic flexibility, and the necessity to reduce intra-company friction all lead to the same conclusion that adaptation enhances performance. Their cumulative impact may be much higher than that of the quest for economies-of-scale, which underlies transference. This study was designed to assess the relationship between transference of marketing strategies and performance. It is based on data about the transference behavior of firms in Denmark. Denmark is a small country and is typified by a large number of small and medium-sized companies. The major advantage of selecting Denmark is that export activities are very important to the economic growth of the country. Thus, we expect its companies to be heavily involved in exporting and international business activities. The study centers on identifying the extent of transfer of marketing methods and activities and its relationship with alternative measures of export performance.

223 Research Propositions In this section the research propositions are developed. We build on prior empirical research to help identify whether the forces for transference or adaptation dominate performance. Empirical research for each of the four propositions is reviewed separately. Product Transference Many papers discuss transference of products to export markets and its relation to export performance (e.g. Craig and Beamish, 1989; Dobrydnio, 1987; Weinrauch and Rao, 1974). Walters and Toyne (1989) argue for a modified product strategy for each export market (see also Craig and Beamish, 1989; Dobrydnio, 1987; Schuster and Bodkin, 1987; Tookey, 1964; Walters, 1989). Tesar and Tarleton (1982, 1983) report that most managers perceived that products and packaging needed modification prior to exporting. Sorenson and Wiechmann’s (1975) study is an exception, as in 75-93% of their paired countries comparisons, the product, brand name, and packaging are highly adapted. Fairly few empirical papers examine the relation between product adaptation and performance. The relation between adaptation and performance has been positive in most cases (Cavusgil, 1984; Diamantopoulos and Inglis, 1988; Kleinschmidt and Cooper, 1988), except Koh (1991), where the decision to modify the product was not related to perceived performance differences. In a comprehensive review article, Aaby and Slater (1989) suggest that product adaptation leads to enhanced performance. Price Transference Piercy (1981) reports that most exporters adapted their prices to fit export markets (see also Walters, 1989; Walters and Toyne, 1989). Karafakioglu (1986) reports that almost two-thirds of Turkish exporters adapted their prices for exporting. In Weinrauch and Rao (1974), price and credit adaptation were perceived as important to success by 64-73% of the sampled exporters. Once again, Sorenson and Wiechmann’s (1975) study is an exception. In their sample, price was standardized in 56% of the cases. Price standardization, however, did not enhance performance (see also Koh, 199 1). In sum, it is reported in most studies that a majority of exporters adapt, rather than transfer, prices and credit term. In no study was the relation of such strategies with performance examined directly. However, the argument that a majority of firms choose only strategies that enhance performance and abandon those that do not is intuitively appealing. Distribution Transference The emphasis here is not on the number of markets served, which changes by definition, but rather on strategy. For example, if manufacturers’ representatives are used in one market, would they also be used in another? Alternatively, if a master distributor is used in one market, will such

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distributors be used in other markets as well? Relatively little research is available about the relationship between adaptation or transference of distribution and export performance. Walters (1989) and Schuster and Bodkin (1987) report that most exporters adapt their distribution strategies. Different elements of the distribution mix were standardized in 59-80% of the cases in Sorenson and Wiechmann’s, (1975) study, but the relation between the distribution-mix activities and performance failed to reach significance. Promotional Standardization As early as 1966, researchers emphasized the importance of not transferring advertising strategies and the negative impact on performance that transference has (Dunn, 1966, 1976; Killough, 1978; Schleifer and Dunn, 1968). Walters (1986, 1989) argues for adaptation of promotion for export markets. Schuster and Bodkin (1987) report that 40% of the firms in their sample adapted their advertising and 53% adapted their trade show strategies to diverse international markets. Greco (1991) reports that 62% of the firms in his sample use adapted advertising almost exclusively. Sorenson and Wiechmann (1975) conclude that even though 43-71% of promotional-mix activities were standardized in their sample, such levels of standardization did not lead to improved performance. In summary, prior research mostly substantiates an inverse relation between transference of marketing strategies and performance. While the relation fails to reach significance in some studies, the findings are fairly consistent. Apparently, the forces driving exporters to adapt are stronger than those driving them to transfer. In sum, we propose that: Proposition 1 (Pl). The relationship between export performance and the extent of transference of marketing strategies and activities is negative. However, prior research has documented the opposite relationship or nonsignificant relationships in some cases. One explanation for the inconsistencies is the existence of other explanatory or moderating variables (Jain, 1989). The relationship between transference and export performance may depend on moderators, such as the nature of the company (e.g. company size) and the nature of the target market (e.g. cultural distance). There are two approaches to achieving control over the effects of these moderators: choice of homogeneous samples and including the moderators in the study. Szymanski et al. (1993) adopted the former by studying international marketing in Western countries only. We chose the latter and include company size (measured by total sales), cultural distance (measured as the distance to the largest export market), product type (measured as consumer or non-consumer type product), and export commitment (measured by human resources dedicated to exporting) in our analyses. Cultural distance between two markets is an important determinant of the viability of transferred strategies (Cavusgil et al., 1993; Jain, 1989). Strategies can be safely transferred from one market to another only to the extent that

225 the cultural distance between the two markets is small, but not otherwise. The more similar the cultural context of product use, for example, the higher the potential to transfer product-mix elements between two markets (Cavusgil et al., 1993; Hill and Still, 1984; Keegan, 1969). Furthermore, product type also plays a role in the viability of its transferability. Jain (1989) proposes that consumer products are more difficult to transfer since their use depends on local idiosyncrasies. In contrast, non-consumer products are easier to transfer since the needs of organizational buyers are more homogeneous. Thus, we propose that: Proposition 2 (P2). The relationship between export performance and the extent of transference of marketing strategies and activities is more negative for culturally-distant markets than for culturally-close markets and for consumer products than for non-consumer products. Earlier, it was argued that transference is driven by the desire to maximize economies-of-scale. Porter’s generic strategy types include cost-leadership (which is based on economies-of-scale), differentiation, and niche (Porter, 1980). Based on his arguments, cost-leadership is more appropriate for large companies than for small companies. The use of organizational size to explain various phenomena has been debated in the literature. Some argue that it is irrelevant (e.g. Czinkota and Johnston, 1983; Samiee and Walters, 1990), whereas others argue that it is (e.g. Ali and Swiercz, 1991; Fraser and Hite, 1990). However, the empirical evidence supporting the importance of size is substantial. In most studies that included size, it was reported to have a positive relation with export performance (e.g. Cavusgil, 1984; Diamantopoulos and Inglis, 1988; Kirpalani and Macintosh, 1980; Piercy, 1981). Based on prior research, we decided to use organizational size, measured as sales. In general, we expected a positive relationship between size and export performance for any level of transfer of marketing methods. Proposition 3 (P3). The relationship between organization size and export performance is positive regardless of the level of transfer of marketing methods. Commitment has long been a critical organizational characteristic in explaining export behavior and performance (Bilkey, 1982; Tookey, 1964). For example, Kirpalani and Macintosh (1980, p. 87), in their study of exporting in North America, report that management practices are the most critical factor underlying success in exporting. “Top management effort also had a significant relation with success . . . Commitment and effort by top management. . . is a crucial factor . . . Export organization . . . and the quality of staff in the export unit is also associated with success.” Some researchers use the existence of an export unit to measure commitment (e.g. Tookey, 1964; Samiee and Walters, 1990). Companies with

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a separate export unit outperformed companies without one (Bilkey, 1982). The number of people dealing with exporting in the company has also been used as an indicator of commitment to exporting. For example, Diamantopoulos and Inglis (1988) measured the number of full- and part-time employees dealing with exports. Reid (1983) also used the number of employees for this purpose. This study uses the latter approach to operationalizing commitment and uses the number of export employees as a measure of commitment. The positive relation between commitment and performance should hold regardless of the level of transfer of marketing methods. We propose: Proposition 4 (P4). The relationship between export commitment and export performance is positive regardless of the level of transfer of marketing methods. Definitions of Export Performance We turn now to defining conceptually export performance in order to design its measures as well as assess its relationships with other constructs, such as marketing strategies. Since a conceptual definition should guide measurement, export performance is defined in a way that will make the resulting measures applicable to most firms by allowing multiple performance outcomes. Export performance is defined conceptually here as: “The composite outcomes of the export sales of the exporting company.” In operationalizing export performance, the present study builds on the paradigm proposed by Aaby and Slater (1989) and Madsen (1987). They use the strategy-structure-performance (SSP) paradigm in synthesizing past research on export performance. Madsen (1987) argues for three performance sub-dimensions: sales, growth, and profitability.* Table 1 (modified from Shoham, 1991) summarizes - on the basis of the SSP dimensions - the measures used in prior research (Axinn, 1988; Bilkey, 1982; Christensen et al., 1987; Cooper and Kleinschmidt, 1985; Craig et al., 1987; Cunningham and Spigel, 1971; Dicht et al., 1990; Douglas and Craig, 1983; Gomez-Mejia, 1988; Kirpalani and Macintosh, 1980; Ryans, 1988; Rosson and Ford, 1980, 1982; Tookey, 1964; Samiee and Roth, 1992; Samiee and Walters, 1991). This structure is in line with the conceptual definition presented above. Methodology A survey of export managers was conducted in Denmark. A mail survey technique was used to study the internationalization process of exporters. The data were obtained from a random sample of companies selected from a national directory of Danish companies. To be included, a company had to be a manufacturing firm and engaged in export activities. In all, 1200 companies *Koh’s (199 1) discussion of export performance is limited to perceived profitability. Aaby and Slater’s (1989) review includes a large number of export performance items. It lacks the more structured dimensional approach used by Shoham (1991).

227 Dimension

Sales

Growth

Financial outcomes

Measures used in past research

(1) Ratio of export to total sales (2) Absolute export sales (3) Export ratio relative to industry (4) Success perception (5) Variability of export sales ratio (6) Breakthrough into difficult markets (7) Number of export markets (8) Six years survival in exports

(1) Growth in export sales (2) Growth in ratio of export to total sales (3) Success perception (4) Breakthrough into difficult markets (5) Number of export countries (6) Six years survival in exports

(1)ROI (2) ROA (3) Market share (4) Change in market share (5) Export profits (6) Gross margin on exports (7) Opertaing profit ratio (8) Perceived export sales relative to industry (9) Success perception (10) Export sales ratio variability (11) Breakthrough to new markets ( 12) Number of export markets (13) Six years survival

Source: Shoham (1991).

were selected for the study. The export manager in each firm received a notification letter, followed by a first mailing of the questionnaire. Prior to mailing a second copy, a reminder letter was sent to each of 1200 firms. A total of 456 questionnaires were returned yielding a response rate of 38.0%. This response rate is similar in magnitude to what has been reported in the literature for similar populations (e.g. Fraser and Hite, 1990; Samiee and Roth, 1992). We examined the industry distribution of respondents to that of the sampling frame. The differences in the two distributions were small and insignificant, which suggests that the effects of non-response bias are minimal. A comprehensive questionnaire pertaining to various aspects of internationalization was sent to the sampled companies. Since the major concern of this paper is transference of marketing activities, only data relevant to that issue are reported together with the various measures of export performance. Selected characteristics of responding companies are presented in Table 2. The companies can be characterized as small- and medium-sized. The average number of full-time employees is 181. However, large companies are represented as well, as the responding companies ranged in size from one employee to 8,000 employees. Regarding the level of international involvement, on average, international sales account for 43.9% of total sales for responding companies. Results Seven items

were

used

to measure

transfer

of marketing

activities.

Transfer of Marketing Methods on Export Performance

Table 1. Measures of Export

Performance

228 International Business Review 3,3

Table 2. Percent Distributions of Selected Descriptive Variables

Variable

Percent (n = 456)

Full time employees 10 or less 11-50 51-100 More than 100

9.9 39.3 21.3 29.5

Total sales (sales in DKr) 12,000,OOO or less 12,000,001-30,000,000 30,000,001-100,000,000 More than 100,000,000

26.3 19.6 29.3 24.8

Export sales (sales in DIG) 5,000,OOO or less 5,000,001-10,000,000 10,000,001-50,000,000 More than 50,000,OOO

33.7 12.4 31.8 22.1

Respondents were asked to indicate the extent to which they change each marketing variable from that used in the home market, using a five-point scale (1 = extensive changes; 5 = no changes). Note that no change from home market behavior is the operational definition of transfer. The variables were product design, price, advertising and promotion, distribution, product quality, service support, and market research. The means and standard deviations for each of the seven measures are presented in Table 3. The mean values fall primarily in the range of 34 on the five-point scale. These values indicate that changes were slight, or that a relatively high level of transference was used. An examination of the correlation matrix for the seven items (available from the first author) revealed significant and high positive correlations. On the basis of these correlations, we decided to form a summated scale composed of the seven items. This was done to minimize the problem of multi-collinearity. The summated scale has an alpha of 0.76, which suggests that it is a reliable scale and averages 25.38 (standard deviation (SD) = 6.09).

Table 3. Mean Values of Measures of Change when Transferring to Foreign Markets (n = 456)*

Marketing variables

Mean (SD)

Product design Price Advertising Distribution Product quality Services Research

3.18 3.01 3.54 3.14 3.87 3.70 3.71

‘Respondents change).

rated each variable on a five-point

(1.45) (1.33) (1.30) (1.50) (1.53) (1.35) (1.26)

scale of change (1 = extensive change, 5 = no

229 Performance

measure

Five years real export growth Satisfaction of objectives? Number of export countries Two years sales change in exports Export-to-total sales ratio Success in export to end users$ *Measured on a five-point TMeasured on a five-point $Measured on a five-point

Transfer of Marketing Methods on Export Performance

Mean (SD) 2.15 2.53 26.32 -261.14 5.31 2.15

(0.91) (0.95) (60.48) (1539.21) (84.4) (0.82)

scale where 1 = large growth and 5 = large decline. scale where 1 = very satisfactory and 5 = very unsatisfactory. scale where 1 = very successful and 5 = very unsuccessful.

Exporters’ scores on the summated scale were used in the analyses reported here. Data were collected on measures from each of the three sub-dimensions of performance discussed earlier - sales, growth, and profitability. For the purpose of this study, export performance was operationalized as latest-year export sales (sales dimension), export-to-total sales ratio (sales dimension), number of export markets served through middlemen* (sales dimension), change in export-to-total sales ratio over two years (change dimension), perceived satisfaction with meeting expectations (taps into the domain of all dimensions), perceived success with exporting through Danish intermediaries, to end users or middlemen, or by production or sales subsidiaries (tap into all three dimensions), and perceived export growth (change dimension). While not measured directly, we believe that profitability is captured in the perceptual measures that were used. For example, managers probably consider profitability when they provide a measure of satisfaction with exports having met expectations. The measures of export performance are shown in Table 4. The firms export on average DKr 70.45 millions, suggesting fairly heavy involvement in international sales. Almost all use middlemen at least for some markets. Sales through middlemen account for operations in 11.4 countries on average. Finally, the subjective measures of performance fall in the range 2.15-3.11 (on a five-point scale where 1 denotes high performance). In an effort to establish the validity of the set of ten measures of performance used here, we analyzed the correlations between these measures. Thirteen of the possible 49 simple correlation coefficients between measures of export performance are significant at 0.05 or lower (and another three at 0.05 to 0.10). This proportion exceeds that which is expected by chance and suggests that the measures of export performance are tapping into the same *A colleague drew our attention to the fact that the number of export markets measure of performance. Some argue that it is a strategy variable. It might choices by exporters with regard to market entry decisions. We recognize nature of the causeeffect of the number of export markets. However, since it the past for this purpose, we included it in our study as well.

is a problematic reflect strategic the problematic has been used in

Table 4. Mean Values of Export Performance Measures (n = 456)

230 International Business Review 373

domain. With two exceptions (present and two years change in export-to-total sales ratio and satisfaction with exporting through a sales or a production subsidiary), all correlation coefficients (simple R values) are smaller than 0.54, which suggests that while the measures share some variance, each also has a significant unique element. Furthermore, each measure is significantly correlated with at least one other measure, supporting the reliability of the set. Considering the multivariate nature of the data, the regression technique was deemed the most appropriate to test the relationships between each dependent variable and the independent variables simultaneously. The performance measures discussed earlier were regressed on the summated transference scale, on commitment to exporting, and on exporter size. To test the moderating effect of cultural distance, we split the sample on the basis of the cultural distance between Denmark and each exporters’ major export market. We used Hofstede’s (1984) measures of cultural distance and formed a summated measure composed of the absolute distance on each of Hofstede’s four-dimensions. The validity and reliability of the four-dimensions of cultural distance has been assessed in Hofstede’s (1984) text. In all, ten multiple regressions were performed for companies whose major export markets are close and ten for those whose major export markets are distant. To test the moderating influence of product type, we split the sample to companies that export consumer versus non-consumer products (Jain, 1989; Samiee and Roth, 1992). Again, ten regressions were performed for each of the two groups. Discussion Tables 5 and 6 present the results of the multiple regression analyses conducted for each of the four sub-samples. In all, only seven of the 40 multiple regression F-values were not significant. R2 values for the 33 significant regressions range from a low of 0.15 to a high of 0.97, averaging 0.75 (excluding the seven non-significant regressions) or 0.61 (for the 40). Stated differently, more than 60% of the variance in export performance is accounted for by the four independent variables used here. The seven cases for which the regressions’ F-value was not significant (export-to-total-sales ratio for distant markets and the changes over two years therein for close and far markets) for both consumer and non-consumer products, and for success in production abroad for consumer products, are for export-intensity-type measures for the most part. The regression for export ratio for close cultural markets, which is significant, provided the lowest R value of the significant regressions. It may be that the set of independent measures we used does not account well for variability in export intensity. For example, export intensity might be a strategic choice made by the exporting companies, rather than an outcome of the strategies we included in the regressions. If this is the case, we need to search for other explanations for the choice of the level of export intensity. The relationship between export performance and the extent of transference of marketing strategies and activities is posited to be negative

Transfer of Marketing Methods on Export Performance

Table 5. Multivariate Regression Coefficients - Close and Distant Cultural Markets’ Subsamples*

-0.10 (O.OO)t -0.10 (O.OS)i 0.21 (O.OO)t -0.01 (0.68)

Export employees

75 265

75 266

75 266

0.32 (O.OO)t 0.37 (o.OO)t

0.21 (0.05)i 0.14 (0.02)t

0.24 (0.03)t 0.12 (0.04)t

75 266

0.69 (O.OO)t 0.00 (0.51)

0.17 (0.02)? 4.02 (0.75)

4.06 (0.45) XI.01 (0.86)

75 266

0.00 (0.79) 0.00 (0.77)

XI.04 (0.78) 0.01 (0.86)

a.01 (0.96) 0.02 (0.82)

0.79 (O.OO)T 0.12 (0.33) 0.10 (0.13) a.07 (0.29)

0.32 (O.OO)t 0.48 (O.OO)t

kCoefficients for consumer products are shown in the top line of each row. tsignificant at P < 0.05. *Cannot be calculated owing to small sample size.

Sub-sample size

0.85 (O.OO)t 0.81 (O.OO)t

0.97 (O.OO)t 0.72 (O.OO)t

Adjusted

R?

I .30 (O.OO)t XI.08 (0. IO) 0.72 (O.OO)t 0.06 (0.05)1

Total sales

0.94 (O.oO)t 0.88 (O.OO)t

-0.03 (0.11) a.02 (0.66)

Transfer scale

Perceived real growth

Export sales

Variable

Export sales growth

Export sales intensity

Number of countries Served by middlemen

75 266

0.80 (O.OO)t 0.83 (O.OO)t

0.07 (0.23) 0.01 (0.67)

-0.00 (0.95) 0.04 (0.17)

0.88 (O.OO)t 0.89 (O.OO)t

Exporting having met expectations

32 95

0.88 (O.OO)? 0.87 (O.OO)t

0.19 (O.Ol)? 0.20 (o.OO)t

0.01 (0.93) -0.10 (0.02)I

0.87 (O.OO)t 0.88 (O.OO)t

Success of export via Danish middlemen

75 262

0.83 (O.OO)t 0.84 (O.OO)t

0.06 (0.24) 0.06 (0.08)

a.06 (0.30) 0.00 (0.84)

0.92 (O.OO)t 0.89 (O.OO)t

Success of export via foreign middlemen

14 86

0.70 (0.00) t 0.76 (0.00) t

0.08 (0.61) 0.10 (0.12)

0.08 (0.80) 0.06 (0.39)

0.83 (O.OO)t 0.81 (O.OO)t

Success of export via sales subsidiary

4 25

-_$ 0.82 (O.OO)t

-Z 0.1 I (0.32)

-_$ 0.11 (0.32)

-$ 0.82 (0.00)~

Success of export via production subsidiary

233 (Pl). This relation is supported by the data for most performance measures. In 29 of the 33 regressions with significant F-values, the regression coefficient for the summated scale of transference is positive and significant (P < 0.05). Recall that the transference scale was constructed such that low values correspond to transference and high values to adaptation. With the exception of export sales (non-significant coefficients), these coefficients support Pl . Why are the results for export sales different? One explanation is that for large export-intensive firms, transference is a preferred strategy in that it is related with increased sales and export markets. This argument is similar to the one made by Jain (1989), who posits that adaptation is more feasible for small companies. However, we control for the effect of size on export performance by including it in the regressions. A second explanation was discussed earlier. It may be that export intensity is a strategy variable, rather than a performance variable. If this is the case, transference might be explained by strategic choices made by exporters on these strategies, rather than the other way around. In other words, the decision to increase export intensity is made prior to the decision to transfer strategies and explains transference. Other than the cases noted, the relationship between export performance and transference is negative as proposed in Pl. As the level of transference increases, perceived export growth, perceived satisfaction with exports having met expectations, and perceived success of exporting via Danish and foreign middlemen, as well as via sales and production subsidiaries decrease. The moderating effects of cultural distance and type of export products discussed in P2 were not borne out by the data. The regression coefficients for far and close markets are virtually the same for all cases where PI was substantiated. The smallest difference between the coefficients is 0.03 (real perceived growth) and the largest is 0.24 (for perceived performance of exporting via a production subsidiary). However, the large difference for performance of production subsidiaries may be due to the small sample sizes for this form of export (9 close and 17 distant markets). The differences in regression coefficients for product types are even smaller. They range, for regressions with significant F-values, between 0.01 (for having satisfied objectives and for success of exporting via a Danish middleman) and 0.16 (for the number of markets served by middlemen). The differences between these regression coefficients fail to reach significance (P > 0.05) and their directions are mixed. In summary, while the data provide some directional support for P2, in that the coefficients are larger for distant markets compared to close ones, the differences are not significant (P > 0.05). Additionally, the data provide no support to the moderating effect posited in P2 for the type of product. The number of export employees, which is the measure of export effort used in this study, is related positively to the latest year export sales (P3). It is also related positively to the number of export markets served by middlemen for this group of Danish exporting companies, but only for culturally close markets (the coefficient for distant markets is positive but not significant).

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of

Marketing Methods

on

Export Performance

234 International Business Review 393

This relation also holds when the sample was split based on the type of export product, except for export sales on consumer products. A positive relationship was also found for perceived real growth and perceived success of exporting via a Danish middleman. In the case of export sales, the relationship between the number of export employees and performance is negative and significant, contrary to expectations. It may be that for consumer products, the number of export employees is not related to export performance. This would be the case, for example, if most exporters of consumer products depend on foreign intermediaries or on foreign subsidiaries. An examination of the data reveals that indeed, exporters of consumer products tend to have fewer export employees than exporters of non-consumer products (5.2 and 6.7, respectively). With the one noted exception, the relationship between export commitment and performance is as expected in P3. Without commitment in the form of human resource, export performance suffers, at least for some measures of performance. Thus, the results are consistent with prior research (Bilkey, 1982; Cunningham and Spigel, 197 1; Kirpalani and Macintosh, 1980; Tookey, 1964). Finally, size was measured by total sales and was expected to be positively associated with export performance (P4) regardless of the level of transference. The data offer support for this proposition. Larger firms export more, regardless of cultural distance to the target markets. They also export through middlemen to a larger number of export markets. Additionally, the larger the exporter the better the perceived performance of exporting through foreign intermediaries or directly to foreign end-users, but only for close markets (the relationship for distant markets is also positive, but fails to reach significance). In all cases for which the size coefficient is significant, it supports P4. Analysis Based on the findings of this study there appears to be a high level of support for the transference proposition (Pl). The level of adaptation versus transference of the marketing-mix strategies and activities as measured is related to export performance for most measures of export performance. Companies that transfer marketing strategies and activities from one market to another do not perform as well as companies that adapt for each market separately. The importance of accurate positioning, friction, and flexibility outweighs that of economies-of-scale for this sample. This relationship holds regardless of the cultural distance between the countries and the type of product. Thus, exporting companies are advised to adapt marketing strategies to each export market in which they operate. The advantages of adaptation are larger than the reduction in costs derived from the larger scale of operations. This is the case for all modes of operation in foreign markets. The negative impact of transference holds in 15 regressions that cover exporting through local and foreign intermediaries and sales and production subsidiaries. In

235 other words, transference harms perceived performance for each of the four modes in much the same manner. It is important to note that not only are the relationships robust across four modes of operation in foreign markets, they also hold for static and dynamic measures of performance. Transference of marketing methods and activities harms performance measured by the number of markets, export intensity and success of sales through four different modes of operations, which are static measures of performance. Furthermore, it also harms perceived real growth, which is a dynamic measure of performance. Thus, firms are advised to adapt their marketing methods to foreign markets, regardless of their performance orientation. Both the short- and long-range effects of transference are negative. An examination of the simple correlation coefficients for the transference and performance items (available from the first author) suggests that most elements of the marketing mix follow the same pattern as that found in the regressions for the summated scale. Transference of communication elements is related negatively to the number of export markets, to export sales, and to perceived real sales growth. Transference of marketing research activities is associated with a smaller number of export markets, lower objective and declining perceived export sales, and low export intensity The higher the level of transfer of distribution activities, the larger the perceived decline in export sales. Finally, the higher the level of transfer of product quality, the lower the perceived success of exporting through foreign intermediaries. Therefore, decisions to transfer these activities should be avoided, if at all possible. In two cases, however, the relation between transference and performance was positive, namely for product design with the number of countries and for research activities with objective sales growth. To the extent that these are the performance measures important to a given firm, transference of the two elements may enhance performance. The expected moderating effect of cultural distance (Jain, 1989) failed to materialize in this sample. While the negative relationship between transference and performance was stronger in culturally distant markets, the differences in strength (measured by the regressions’ coefficients) were not significant. One plausible explanation for these findings is that the negative main effect of transference is so strong as to make the moderating effect of transference with cultural distance insignificant. Thus, the recommendation to avoid transference holds for close and distant markets. The expected moderating effect of the type of export product did not materialize in this sample. The differences between the coefficients for consumer and non-consumer products failed to reach significance and were, mixed in directions for the various export performance measures used. Our explanation for this finding is based, again, on the strong main effect of transference. Its effect was strong enough so as to make the interactive term insignificant. Thus, managers are advised to use adaptation as the preferred mode of operation for both types of products. Managerial commitment of time and resources was related positively to

Transfer of Marketing Methods on Export Performance

236 International Business Review

373

export performance in three cases, consistent with prior research (Bilkey, 1982; Cunningham and Spigel, 197 1; Kirpalani and Macintosh, 1980; Tookey, 1964). As is evident from our data, commitment of resources to exporting has a positive effect on performance. Thus, export managers who are interested in enhancing performance are advised to “put their money where their mouth is”. Evidently, insufficient resources harm export performance. Finally, company size, measured by its total sales, had a positive impact on performance, which is independent of the major transference or adaptation decision. This relationship reached significance in four regressions, three of which are for culturally close markets. The fact that transference harms performance even after controlling for company size contradicts Jain’s (1989) proposition. Apparently the strong negative effect of transference holds even for large companies, contrary to Jain’s expectations.

Directions for Future Research The present study extends prior research about marketing transference. It includes measures of transfer for a number of marketing activities compared to earlier empirical studies that dealt exclusively with advertising. The present study also uses a number of measures of performance. However, this study has some limitations regarding measures of export performance and marketing transference. Some important measures of export performance were not included in the study - e.g. measures of profitability. We believe that managerial performance perceptions partially account for financial performance, but they probably take in account other factors as well. Future research could include direct and objective measures of performance. Another important and fruitful direction for future research is to expand the specific determinants of the feasibility of transference. Possible variables for this purpose include the firm’s market position, and the environment (Jain, 1989). Transference may very well be more feasible under some levels of these variables and not others. An important question that needs to be addressed concerns the generalizability of the findings from Danish exporters to firms in other countries. The firms in this sample use, on average, slightly transferred activities and methods. This might be a more feasible strategy for firms that are involved in mostly close psychological markets. However, splitting the sample on the basis of psychological distance to the most important foreign market yielded results that are mostly similar for close and distant markets. Thus, we believe that Denmark’s location in Scandinavia within a relatively homogeneous group of countries does not reduce the generalizability of the findings to firms located in less homogeneous areas. The wide sales, export sales, and firm size distributions of the sample also strengthen the generalizability of the findings. However, future research can examine the relationships with data generated from other countries. Finally, the set of marketing activities can be broadened beyond the seven items used in this study. For example, product adaptation was measured here by three items (product, quality, and service), whereas other strategic

237 dimesions, such as distribution, were measured by one item only. Future research might expand the coverage of price transference to account for credit and payment terms, the coverage of distribution transference to account for length of channels, types and quality of intermediaries, and the coverage of advertising transference to account for promotion budgets. Transference of marketing activities is, for the most part, related negatively with export performance. This finding substantiates the positioning perspective, which is driven by price discrimination, flexibility, and the theory offriction. The relationship holds even after controlling for the cultural distance to the major export markets, for the type of export product, and for firm size suggesting that adaptation and customization are superior to transference. References Aaby, N.E. and Slater, S.F. (1989) Management Influences on Export Performance: a Review of the Empirical Literature 1978-88. Znternational Marketing Review, Vol. 6, No. 4, pp. 7-26. Ali, A. and Swiercz, P.M. (1991) Firm Size and Export Behavior: Lessons from the Midwest. Journal of Small Business Research, Vol. 24, No. 2, pp. 71-77. Axinn, C.N. (1988) Export Performance: Do Managerial Perceptions make a Difference? InternationalMarketing Review, Vol. 5, No. 2, pp. 61-71. Bartlett, CA. and Ghoshal, A. (1986) Tap Your Subsidiaries for Global Reach. Harvard Business Review, Vol. 64, November/December, pp. 87-94. Bilkey, W.J. (1982) Variables Associated With Export Profitability. Journal of International Business Studies, Vol. 12, Fall, pp. 39-55. Bilkey, W.J. (1987a) Toward a Theory of Export Marketing Mix, in Cavusgil, S. T. (Ed.), Advances in International Marketing. JAI Press, Connecticut. Bilkey, W. J. (1987b) Profitable Export Marketing Practices: an Exploratory Inquiry, in Rosson, P.J. and Reid, SD. (Eds). Managing Export Entry and Expansion. Praeger, New York. Boddewyn, J.J., Soehl, R. and Picard, J. (1986) Standardization in International Marketing: is Ted Levitt in Fact Right? Business Horizons, Vol. 29, No. 6, pp. 69-75. Brooks, M.R. and Rosson, P.J. (1982) A Study of Export Behavior of Small- and Mediumsized Manufacturing Firms in Three Canadian Provinces, in Czinkota, M. R. and Tesar, G. (Eds), Export Management. Praeger, New York. Buatsi, S.N. (1986) Organization Adaptation to International Marketing. International Marketing Review, Vol. 3, No. 4, pp. 17-27. Buzzell, R.D. (1968) Can You Standardize Multinational Marketing? Harvard Business Review, Vol. 46, November/December, pp. 102-l 13. Cavusgil, S.T. (1984) Differences among Exporting Firms based on their Degree of Internationalization. Journal ofBusiness Research, Vol. 12, pp. 195-208. Cavusgil, T.A. and Nevin, J.R. (198 1) Internal Determinants of Export Marketing Behavior: An Empirical Investigation. Journal of Marketing Research, Vol. 18, January, pp. 114-119. Cavusgil, S.T., Zou, S. and Naidu, G.M. (1993) Product and Promotion Adaptation in Export Ventures. Journal of International Business Studies, Vol. 24, No. 3, pp. 479-506. Christensen, C.H., da Rocha, A. and Gertner, R.K. (1987) An Empirical Investigation of the Factors Influencing Exporting Success of Brazilian Firms. Journal of International Business Studies, Vol. 18, Fall, pp. 61-77. Cooper, R.G. and Kleinschmidt, E.J. (1985) The Impact of Export Strategy on Export Sales Performance. Journal of International Business Studies, Vol. 16, No. 1, pp. 37-55. Craig, R. and Beamish, P.W. (1989) A Comparison of the Characteristics of Canadian and UK Exporters by Firm Size. Journal of Global Marketing, Vol. 2, No. 4, pp. 49-64.

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Performance

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Marketing,

Received October 1993 Revised November 1993 Revised March 1994

Appendix. Sample Survey Questions A. Measuring Transference Versus Adaptation This question concerns product that your company sell in overseas markets. Please indicate the extent to which you change each listed marketing variable from what you use in the domestic market. Very much adaptation Product design Price Communications Distribution Product quality Services Market research

1 1

1 1 1 1 1

No adaptation 2 2 2 2 2 2 2

3 3 3 3 3 3 3

4 4 4 4 4 4 4

5 5 5 5 5 5 5

241 B. MeaszrGg Srrfisfrrcriort n~irh Meeting Objecri\,es Overall. how satisfied are you about pour company’s overseas market performance last two years. having achieved the objectives that were for overseas operation.

Very unsatisfied

Very satisfied 1

Transfer of Marketing Methods on Export Performance

during the

2

4

3

5

How Lvould you describe the real growth (without the effect of inflation) in the most important overseas markets for your company’s major product during the period 1980-1985. Large growth

I

1

Moderate growth

Stagnant

Moderate decline

Large decline

2

3

4

5

I