Targeting Export Support to SMEs: Owners International Experience as a Segmentation Basis

Eileen Fischer Schulich School of Business York University 4700 Keele St. Toronto, Ontario, Canada M3J 1P3 Telephone: (416) 736-5076 E-mail: efischer@ssb.yorku.ca

A. Rebecca Reuber Joseph L. Rotman School of Management University of Toronto 105 St. George St. Toronto, Ontario, Canada M5S 3E6 Telephone: (416) 978-5705 Journal of Small Business Economics forthcoming

Acknowledgments: The authors gratefully acknowledge the research assistance of Yavor Stoyanov, Karen Budahazy, Siobhan Lydon, and Franca Young; the financial support of the Entrepreneurship Research Alliance and the Social Science & Humanities Research Council of Canada; the contributions to data collection of Barabara Orser and Allan Riding; and the research opportunities provided by JoAnna Townsend of the Department of Foreign Affairs and International Trade. Contact: Please address correspondence about the paper to Eileen Fischer.

ABSTRACT Targeting Export Support to SMEs: Owners International Experience as a Segmentation Basis This paper addresses the issue of how export support programs can be effectively targeted to SMEs. This paper argues that the normally low awareness and usage of export support programs among SME owners can be countered by segmentation based on their level of export experience. The paper develops a theoretical rationale for this segmentation basis and develops hypotheses related to it. The hypotheses are tested, and largely supported, using data from Canadian SME exporters and pre-exporters. Results indicate that segmentation based on owners level of export experience can be an effective supplement to current segmentation bases. Implications of the results for providers of export support services are discussed in the concluding section.

The internationalization of small and medium-sized firms (SMEs) is the objective of many public policy initiatives world-wide (UNCTAD 1994). There are multiple, interrelated reasons that these initiatives have been developed: most firms are small firms; most people work for small firms; small firms play a critical role in industry innovation; growth-oriented small firms benefit their communities through economic development; and internationalization can provide firm-specific growth opportunities that exceed industry averages (Acs 1999; Aldrich 1999; Japan Small Business Research Institute 1998; OECD 1997). The basic logic behind programs that support small firm internationalization, then, is that internationalization is good for small firms, and small firms are good for economies. Common forms of support extended to SMEs include the provision of information about foreign markets, assistance in contacting brokers or agents, financial assistance such as trade credits or loans, and special incentives such as contributions toward the initial costs of developing products for non-domestic markets. Many programs are intended to support either the initiation of exporting by firms that previously only operated in their domestic markets, or the growth of export sales by firms that have done some limited exporting. A typical program supporting the initiation of exporting by SMEs features training: in Canada, the Forum for International Trade Training would fit in this category. A typical program supporting the growth of exporting offers financial assistance to small exporters: Canadas Export Development Corporation offers a variety of forms of financial assistance to small exporters, such as operating line financing and accounts receivable insurance. Given these programs specifically targeted to SMEs, then, it is both frustrating and worrisome that small firms are less adept than large firms in accessing government

assistance (cf. OECD 1997; UNCTAD 1994). While sizeable resources are being expended, there is often low awareness of program offerings among SME owners, a low rate of usage among those who are aware of the types of assistance available, and little impact on the trading behaviors of firms that do use the programs (Orser, Fischer, Hooper, Reuber and Riding 1999; Seringhaus and Rosson 1990). Commentators have explained the lack of knowledge and interest, and ineffective usage, on the part of small firm owners by suggesting that programs lack a proper basis of segmentation and/or are poorly targeted (Gray 1997; Orser, Fischer, Hooper, Reuber and Riding 1999; Seringhaus and Rosson 1990). It is a common, if implicit, practice to segment the market for export support based on firm level behaviors that are considered to reflect the companys stage of exporting (Crick 1995; Gray 1997; Seringhaus 1987). A minimum of three segments, tacitly assumed to correspond to three stages of export development, are commonly identified and treated as distinct target markets by public providers of export support services. The first segment consists of firms considered pre-exporters: those firms with limited experience in their domestic markets and no export activity. The second segment consists of firms that have become established in their domestic markets and are starting to develop regular foreign customers. So, for instance, the Canadian government has multiple programs targeted at new exporters (New Exporters to Border States, New Exporters Overseas, New Exporters Training and Counseling Program) that are premised on the assumption that firms at this initial stage of exporting will have sufficiently common needs to warrant a common form of export support (Team Canada 1997). The third segment consists of firms that are regular or active exporters. These are normally considered to be larger, more established firms and support programs targeted at such

firms usually require that the firms be at or above particular sales levels (Orser et al 1999). This paper will explore the nature of and rationale behind these existing segmentation bases for export support programs, and will suggest a supplementary approach to segmentation that is based on both theory and an empirical study of Canadian firms. It will suggest that a segmentation basis that focuses on the experience of the SME owner, in addition to those that focus on the export behaviors of the firm, will be a sound, and theoretically supportable, supplement to existing practice. In particular, the paper will attempt to answer the following question: Can SMEs be segmented based on the international experience of their owners such that the resulting groups represent targets with distinct characteristics and needs related to export support services? The paper is developed as follows. First, theoretical bases for current segmentation strategies are reviewed. Next, a theoretical rationale for segmenting based on experiential characteristics of SME owners is presented, and hypotheses concerning differences relevant to needs for export support are developed. The subsequent section describes the methodology used to develop clusters representing different experience segments, and tests the hypotheses concerning differences between these segments. The final section discusses the limitations, conclusions and implications of the paper.

Theoretical Bases for Segmentation of the Market for Export Support Stage Models as the Basis for Current Practice The rationale for segmentation based on stage of internationalization derives from traditional stage models of internationalization (e.g. Bilkey and Tesar 1977; Cavusgil 1980, Czinkota 1982, Reid 1981; Weidersheim-Paul, Olson and Welch 1978). These models1 generally posit that firms pass through a number of stages prior to internationalization (such as pre-involvement, passive exploration, reactive involvement) and one or more developmental stages during internationalization (e.g. limited involvement, active involvement, committed involvement). Stage models suggest that SMEs with a limited domestic track record are less likely than more established firms to be able to enter foreign markets due to their limited knowledge and resource base, while larger and older firms with more experience and resources will be better able to compete in foreign markets due to the firm-level learning and commitment that develops as firms gain experience. Stage-based models of internationalization have been reviewed and critiqued a number of times in recent years (e.g. Anderson 1993; Leonidou and Katsikeas 1996, Oviatt and McDougall 1997; Sullivan and Bauerschmidt 1990). There is concern that the models lack theoretical rigor (Anderson 1993). Moreover, there is considerable evidence that they are descriptive of the behavior of only a subset of SMEs. Recent studies have shown that assumptions regarding domestic start-up are no longer valid (e.g. Cavusgil 1994; McDougall, Shane and Oviatt 1994, Oviatt and McDougall 1994), and that there
There are numerous different stage based models, with differing numbers of stages and different labels for specific stages (Leonidou and Katsikeas 1996). The differences between such models will not be explored here, nor will the terminology associated with any one model be used exclusively, since the basic point is that it is the general notion behind stage models, rather than any given model, that appears to inform many current segmentation practices in export support markets
1

are multiple paths toward internationalization even for firms that are domestic start-ups (Bonaccorsi 1992; Johanson and Vahlne 1990; Kutscher, Burle and Schmid 1997; Sullivan and Bauerschmidt 1990). These concerns about stage models do not, of course, completely invalidate criteria based on such models for purposes of segmentation and targeting in the market for export support services (see, for instance, Crick 1995). They do, however, indicate that attention should be paid to the limits of applicability of stage based criteria. Moreover, they suggest that supplements to existing segmentation bases need to be considered. Toward Another Basis for Segmenting Export Support Service Markets To develop a supplementary basis for segmenting the market for export support, it is useful to begin by considering why stage models may be less than universally applicable. It can be argued that stage models are now less robust than when they were first articulated, since they were developed in the late 1970s and early 1980s. In the last decade, the business environment has become ever more globalized facilitating the internationalization of all young and small firms (Oviatt and McDougall 1999). For example, since 1990, international trade barriers have decreased, enabling technologies, such as fax and the Internet, have become commonplace, and the sheer volume of international trade has grown substantially (OECD 1997). However, while it is true that the number of SMEs operating in foreign markets is increasing, it is still the case that only a small proportion of SMEs sell a significant proportion of their output outside their own domestic markets (cf Bell 1997; Leonidou 1995; OECD 1997). The variability among SMEs in their attempts to internationalize suggests that there are differences

between these firms in the ways that their owners understand and pursue global opportunities. This leads to a second observation regarding the limitations of the existing segmenting and targeting practices for export support programs. Most such programs segment based on the activities or characteristics of the firm rather than on characteristics of the owner-manager of the firm (Gray 1997). Yet, particularly in SMEs, the founder or current owner and that individuals top management team will have a profound impact on the strategies adopted and enacted (Chandler and Hanks 1994; Gimeno, Folta, Cooper and Woo 1997). In fact, both stage models of internationalization (e.g. Cavusgil 1980, Reid 1981, Wiedersheim-Paul, Olsen and Welch 1978) and numerous studies of factors predictive of the degree of firm internationalization (e.g Bloodgood, Sapienza and Almeida 1996;Calof and Beamish 1994; Cavusgil and Nevin 1981; Crick and Jones 2000; Eriksson, Johanson, Majgrd and Sharma 1997; Erramilli 1991; Johanson and Vahlne 1990; Knight 2000; Kutschker and Burle 1997; Liang 1995; McDougall, Shane and Oviatt 1994; McDougall and Oviatt 1996; Reuber and Fischer 1997) indicate that characteristics of SME owners are of critical importance to the internationalization of their firms and that they need to be taken into account when designing or delivering export support services. As Gray (1997) suggests regarding large and mature firms, companies at the same stage of internationalization may require different types of assistance depending on the characteristics of the individuals in charge of export development or internationalization more generally. In the case of SMEs, it can be argued that the international experience of the owners will be critical in determining both what kinds of support may be required, and

how service providers should design their communications strategies. This argument will be developed below. International Experience Many studies have examined the impact of managers international experience on their firms internationalization behaviors (e.g. Brooks and Rosson 1982; Oviatt and McDougall 1994, Reuber and Fischer 1997). A number of measures of experience have been posited to predict propensity for, or success in, exporting, such as having lived abroad or worked abroad (cf. Meisenbock 1988; Reid 1981). Arguably, however, the most consistently successful predictor has been the managers level of past experience in working on developing international markets for a firm (cf. Reuber and Fischer 1997). This is consistent with findings that human capital traits of entrepreneurs, especially their experience, influence their decision making about their firms (Gimeno, Folta, Cooper and Woo 1997). There are two interrelated reasons why the international experience of firms key decision makers is expected to be related to the way they manage the export (or other internationalization) activities of their firms and to the export support services they are likely to need. First, individuals learn through experience, developing both expertise and contacts, which reduces the uncertainty associated with decision making. Thus an SME owner with prior international experience is likely to have a greater level of knowledge and skills regarding how to manage the international business of the firm (Bloodgood, Sapienza and Almeida 1996; McDougall, Shane and Oviatt 1994). This should mean that more experienced owners direct the international activities of their current firm in a more proactive and strategic manner than would owners with limited experience. It should also mean they scan more proactively for information required to export

effectively, since, as the literature on expertise suggests, they are more likely to know what they do not know (Reuber and Fischer 1999). A second reason that experience matters is that it influences the formation of the firms dominant logic (Bettis and Prahalad 1995; Prahalad and Bettis 1986), an information funnel through which managers attention is filtered. Different experiential contexts are likely to result in the formation of different types of dominant logics, which will result in different decisions and actions on the part of decision makers (Boeker 1997; Tyler and Steensma 1998). Accordingly, when export activities are a substantial part of the experiential context of a firms decision makers, it is expected that they will pay greater attention to them when managing the firm. This should mean that SME owners with greater international experience pay more attention to internationalization as a growth strategy, and to the barriers that will impede the execution of a strategy for growth through internationalization. Thus, through learning and attentional processes, it is expected that the nature and degree of international experience held by SME owners will affect the way they manage the development of exporting in their firms, and will mean that there are differences in their need for export support services. In particular, the foregoing discussion suggests the following hypotheses: Compared with SME owners who have greater levels of international experience, SME owners with lower levels of international experience will: H1 Be less likely to view the development of export markets as a competitive route to growth; H2 Pay less attention to valuable sources of business information related to exporting;

H3

Be less aware of key network-related barriers that may prevent the development of greater export intensity. Each of the hypothesized differences should be relevant to the kind of export

support services that are required. Decision makers who are less inclined to view exporting as a competitive route to growth require more basic forms of training in how to manage export development in a proactive and strategic manner. Decision makers who pay less attention to key sources of business information require more coaching on what information is important and how to obtain it. Finally, decision makers who are less apt to recognize critical networkrelated barriers have greater need of sensitization to likely obstacles as well as means of overcoming them. In addition to hypothesizing that less internationally experienced SME owners have different needs related to export support services, it is also reasonable to expect that they will have to be targeted by different kinds of communications strategies. Less internationally experienced SME owners, who are less aware of the specific kinds of difficulties associated with exporting, and who scan less actively for information related to exporting, are less likely to seek out or happen upon information regarding available export support services. This assumes, of course, that current communication strategies among export support service providers are not effectively targeting less experienced managers since they are instead focused on differentiating among firms at various stages of internationalization. This suggests the following hypothesis: H4 Firms led by less internationally experienced SME owners will be aware of fewer available export support services than firms led by more experienced SME owners.

A final difference worth considering relates to the usage of export support programs. Whether or not SME owners choose to use programs once they become aware of them will depend on whether they believe them to be suitable for their firms and of value. These costs and benefits will ultimately be situationally dependent, and some firms managed by internationally experienced decision makers will perceive the costs (financial or otherwise) of using the programs to be offset by the benefits. It is expected, however, that among less experienced SME owners, the tendency to try out programs will be higher for two reasons. First, within the segment of less experienced owners, those who do become aware of available programs are likely to be those who are most proactively pursuing export development and most receptive to assistance. The rationale here is that those who are inexperienced but relatively proactive will be seeking out information. Further, those who are inexperienced but eager to pursue exporting may well realize they have need of assistance to offset their relative lack of experience. Second, compared with experienced owners, less experienced ones will be less able to estimate both costs and benefits and so may be more apt to try out the service to gain a better sense of whether it is of value (cf Eriksson, Johanson, Majgrd and Sharma 1997). These arguments lead to the following hypothesis: H5 Among the SMEs whose owners are aware of export support services, firms led by less internationally experienced owners will be more likely to try to use export support services than firms led by more experienced owners. A description of the empirical study to these hypotheses is now provided.

Methodology

Through an initiative of the Small and Medium Enterprise Division of Canadas Department of Foreign Affairs and International Trade, a list of small and medium-sized firms that were either exporting or had the potential to export was assembled. The list was developed from various sources, including business owners associations, web-site directories and trade associations. Eligible businesses employed fewer than 500 employees and were owner-managed.

Sample An initial list of 1,452 potential contacts was constructed. Of these, 1,085 were actually contacted; the remainder did not answer after five attempts to contact them by telephone over a two week period and did not reply to repeated fax messages. Of the actual 1,085 contacts, 132 did not cooperate or could not due to language barriers. Of the remainder, 496 met the study criteria. To meet the selection criteria, firms had to have fewer than 500 employees, had to have a woman who was at least a part owner, and had to be either an exporter or to express an interest in exporting at some point . Among those SMEs that met the selection criteria, 316 were active exporters, defined for purposes of the study as firms that currently exported and had achieved repeated sales to foreign customers. The remaining180 SMEs were pre-exporters, defined for the purposes of the study as firms that indicated an interest in exporting, and may or may not have had some initial exports, but who had no repeat customers. A fax-back questionnaire was sent to each of the 496 eligible businesses. After several rounds of follow-up, 188 questionnaires were completed and returned by the

owner manager: 121 active exporters and 67 pre-exporters. This represents a 38 percent response rate of those contacted and a 26 percent response rate among eligible firms on the database. The mean age of the firms in the sample was 9.5 years (s.d. 10.7, range 0 to 89). The mean number of employees was 19 (s.d. 56, range 0 to 380). The mean rate of foreign sales as a percent of total sales was 23.1 (s.d. 33.1, range of 0 to100). Twenty six percent of the firms in the sample were service providers.

Measures International Experience of SME Owners. Given the focus of this study on the need for export assistance, it was decided that it would be most relevant to measure the amount and perceived relevance of export-related work experience. The amount of export-related work experience of the SME owners was assessed by asking: How many years of business experience do you have in export related work? The mean response was 6.1 years (s.d. 7.1; range 0 to 35). To attempt to determine the perceived relevance of this experience, respondents were asked How important was your previous familiarity with export markets to your decision to export? The mean, on a five point Likert scale (1 = not all important, 5 = extremely important) was 2.5 (s.d. 1.5, range 1 to 5). As will be described below, these two variables were used to cluster respondents into segments. The former are referred to as EXPLENGTH and the latter as EXPRELEV. Perceived Role of Exporting. To measure the tendency of respondents to perceive the development of export markets as a competitive route to growth, respondents were asked about the importance of the following motivations for planning to export or increasing exporting: to increase sales, and to respond to competition. Responses were based on a five point Likert scale (1 = not all important, 5 = extremely

important). The mean for to increase sales was 4.2 (s.d. 1.1 range 1 to 5). The mean for to respond to competition was 2.0 (s.d. 1.4, range 1 to 5). The variables reflected by these measures are referred to as IMPSALE and IMPCOMP respectively. Attention Paid to Key Information Sources. To assess the extent to which respondents paid attention to key sources of information, they were asked to draw on their experience and rate the importance of the certain sources of information. . Again, responses were based on a five point Likert scale (1 = not all important, 5 = extremely important). There are many different sources of information that could have been assessed here: three in particular were chosen based on prior research that suggests that information acquired from business-related sources (e.g. Denis and Depelteau 1985) and from direct experience in foreign markets (e.g. Erramilli and Rao 1990; Johanson and Vahlne 1977; 1990) is critical. The information sources rated were business association and associates (mean 3.6, s.d. 1.4 range 1 to 5), industry publications (mean 2.9, s.d. 1.4, range 1 to 5), and personal visits to foreign markets (mean 3.7, s.d.1.4, range 1 to 5). These variables are referred to as BUSASINFO, INDPBINFO, and VISITINFO Network-Related Barriers Recognized. Indicators of the extent to which respondents recognized an important potential barrier to internationalization lack of networks -- were measured using two different items. Study participants were asked to rate, on a five point Likert scale (1 = not all significant, 5 = extremely significant) the significance of two impediments to exporting. Given the known importance of networks and channels of distribution for exporting (cf Coviello and Munro 1995, 1997), the first impediment was finding local partners (mean 3.0, s.d.1.6, range 1 to 5) and the second impediment was lack of networks (mean 2.8, s.d.1.5, range 1-5). These variables are referred to as PARTNER and NETWORK.

Awareness of Export Support Programs. For each of several national export support programs, respondents were asked to indicate whether or not they were aware of the program. For purposes of analysis, the support programs were divided into two groups. The first group consists of programs that are customizable in the sense that firms at different stages or degrees of internationalization could take advantage of them. These included: The Business Development Bank of Canada, the Export Development Corporation of Canada, Canadas International Trade Centers, Canada Trade Commissioner Services and Canadas Trade Missions. The second group consists of programs specifically targeted at new exporters. These included: the New Exporters to Border States program, the New Exporters Overseas program, the Program for Export Market Development, and the Forum for International Trade Training. For the first group and for the second, a score was created for each respondent by summing the number of programs in the group of which the individual was aware. The score for the first group of programs is referred to as the variable general program awareness (AWRG). The mean was 3.1 out of 5 programs (s.d. is 1.7; range is 0 to 5). The score for the second group of programs is referred to as the variable new exporter program awareness (AWRN). The mean was 1.4 out of 4 programs (s.d. is 1.3, range is 0 to 4). Use of Export Support Programs. For the same national export support programs, respondents were asked to indicate whether or not they had used the service. The support programs were again divided into groups corresponding to general customizable programs and programs for new exporters. As was the case for the awareness variables, the usage variables were calculated by summing, within each group, the number of

programs the respondent had used. The score for the first group of programs is referred to as the variable general program usage (USEG). The mean among those who had used any of the programs was 1.8 out of 5 programs (s.d. is 3.2; range is 0 to 5). The score for the second group is referred to as the variable new exporter program usage (USEN). The mean among those who had used any of the programs was 1.4 out of 4 programs (s.d is 1.6, range is 0 to 4). Table 1 presents a summary of this discussion of measures. Insert Table 1 about here

ANALYSIS AND RESULTS

Creating Segments via Cluster Analysis

Cluster analysis was used to develop segments of SME owners based on the experience variables, EXPLENGTH and EXPRELEV. Cluster analysis is an exploratory technique, but it is useful for imposing a structure on research data and for developing managerially relevant segments so long as there is as sound theoretical basis for the clusters. As has been argued above, there are theoretical grounds for clustering based on the export-related experience of the SME owner-manager. Without such grounds, there is a danger that clusters identified will arise from the clustering method chosen rather than some underlying structure such as differences between managers (Aldenderfer and Blashfield 1984; Hair, Anderson, Tatham and Black 1995). A hierarchical cluster analysis procedure was chosen because of its demonstrated robustness, ability to maximize within-cluster homogeneity and between cluster heterogeneity, and its ability to recover known cluster structure (Arabie and Hubert

1994). This research could not assume any ideal initial cluster centroid, ruling out the possibility of using a non-hierarchical partitioning method (Hair, Anderson, Tathman and Black 1995). The distance measure used, squared Euclidean distance, is the one recommended for the hierarchical cluster procedure, since it leads to the formation of clusters with the least error sum of squares. Since unstandardized data (e.g. variables with differing scales) can cause weighting problems in cluster analysis, it was deemed preferable to used the standardized data here by taking z-scores. This decision was taken even though standardizing variables may reduce between group differences and lead to conservative tests of hypotheses. Further, since clustering algorithms are sensitive to outliers, one data point was dropped before clustering commenced. The number of clusters can be based on conceptual considerations, visual methods, and/or by examination of increases in the agglomeration coefficient (Hair et al 1995). In this study, all three methods were used. The main conceptual consideration was the number of segments that managers of export support programs could reasonably be expected to serve. Too many segments, requiring too many customized services or communications strategies, are unworkable. However, within-segment homogeneity is a pre-requisite for effective segmentation (Kotler and Turner 1995). Current segmentation bases usually lead to between three and five distinct groups (Gray 1997; Crick 1995; Seringhaus and Rosson 1990). Based on these considerations, the number of clusters sought was determined to range from two to five. To help assess the specific number, changes in the agglomeration coefficients at the later cluster combination stages were examined. Relatively large changes indicated when the major clusters had been formed (signifying significant increases in

homogeneity). Based on this consideration, it appeared that there were two clusters of owner-managers, one less experienced and the other more experienced. This was based on the relatively large changes between the penultimate and the final clustering stages, compared with those between the third to last and the penultimate stages (a 51 percent change between the penultimate and final agglomeration coefficients versus a 24 percent change between the third to last and penultimate agglomeration stages). Visual analysis of the dendogram reconfirmed that two segments appeared to exist. To test the internal validity of the cluster solution, split samples were clustered. Results were compared with the solution when the whole sample was clustered, and the absence of major differences suggested the procedure had produced a relatively generalizable solution. An even more important consideration, however, was the external validity of clusters, which is indicated by comparing clusters using a variable not actually used in the cluster solution, but which is known from prior research to vary according to cluster variable differences (Aldenderfer and Blashfield 1984). In this study, the ratio of foreign sales to total sales (FSTS) of the firms managed by less versus more experienced managers is such a criterion variable, since, as discussed above, prior research has often shown that firms managed by owners with greater international experience achieve higher levels of FSTS. While experienced individuals may buy or found firms that have not yet begun to export, and while inexperienced managers may buy firms that have high FSTS or found firms that export extensively from inception, we would expect firms managed by internationally experienced owners to have a higher FSTS than those managed by internationally inexperienced owners. A one-way ANOVA was therefore used to compare members of the two clusters or segments with respect to the FSTS achieved by their firms. The F-statistic for this test was significant (.01), and a

comparison of means indicated that firms led by more internationally experienced owners had a mean FSTS of 35% versus 13% for those led by less internationally experienced owners. The foregoing analysis, then, lead to the identification of two clusters with differing experience profiles. For the lower experience segment, the mean values for EXPLENGTH and EXPRELEV were, respectively, 4.8 (s.d. 4.6) and 1.5 (s.d. .8). For the higher experience segment, the means for these variables were 8.4 (s.d. 4.8) and 4.3 (s.d. .8) respectively. Thirty six percent of the sample was in the higher experience segment, while the remaining sixty four percent was in the low experience segment. These differences, and the differences between the lower and higher experience clusters on other variables measured, are summarized in Table 2. Insert Table 2 about here. Hypothesis Testing Hypothesis 1 states that, compared with SME owners who have greater levels of international experience, SME owners with lower levels of international experience will be less likely to view the development of export markets as a competitive route to growth To test this hypothesis, one way ANOVAs were done for the variables IMPSALE and IMPCOMP using the experience based segments as grouping variables. The results are shown in Table 3.

Table 3: ANOVAs For Variables Reflecting Exporting as a Competitive Route to Growth F Sig. IMPSALE Group 1 4.05 5.125 .026 Mean Group 2 4.57 Mean IMPCOMP Group 1 1.67 10.249 .002 Mean

Group 2 Mean

2.57

These ANOVAs indicate that Hypothesis 1 should not be rejected, meaning that less experienced SME owners are likely to view exporting less as a proactive route to survival and growth than their more experienced counterparts. Hypothesis 2 states that, compared with SME owners who have greater levels of international experience, SME owners with lower levels of international experience will pay less attention to valuable sources of business information related to exporting. To test this hypothesis, one way ANOVAs were done with the variables BUSASINFO, INDPBINFO, and VISITINFO using the experience based segments as grouping variables. The results are shown in Table 4.
Table 4: ANOVA s For Variables Reflecting Attention Paid to Important Information Sources F Sig. BUSASINFO Group 1 3.18 5.672 .019 Mean Group 2 3.86 Mean INDPBINFO Group 1 2.50 5.465 .022 Mean Group 2 3.20 Mean VISITINFO Group 1 3.52 2.998 .087 Mean Group 2 4.03 Mean

These results are moderately supportive of Hypothesis 2. The F test for the ANOVA for the third variable, VISITINFO (which represents the importance placed on personal visits to foreign markets as a means of gaining information) is only marginally significant, although the nature of the difference is as predicted. The results for the other two variables in this group are as expected. Overall, this lends some support to the idea

that less experienced owners place less importance on sources of information that are likely to be of considerable value. Hypothesis 3 states that, compared with SME owners who have greater levels of international experience, SME owners with lower levels of international experience will be less aware of key barriers that may prevent the development of greater export intensity. To test this hypothesis, ANOVAs were done with the variables PARTNER and NETWORK, using the experience segments as grouping variables. Table 5 shows the results.
Table 5: ANOVAs For Variables Reflecting Awareness of Network-Related Barriers F Sig. PARTNER GROUP1 2.56 5.105 .026 MEAN GROUP 3.29 2 MEAN NETWORK GROUP 2.29 3.949 .050 1 MEAN GROUP 2.94 2 MEAN

These results lend support to Hypothesis 3. Less experienced SME owners do appear to be less sensitive to network related barriers that can inhibit the establishment or growth of exporting channels. Hypothesis 4 states that, compared with SME owners who have greater levels of international experience, SME owners with lower levels of international experience will be aware of fewer available export support services. This hypothesis was tested using ANOVAS for the variables AWRG and AWRN, using the experience based segments for grouping. The results are shown in Table 6.
Table 6: ANOVAs Reflecting Awareness of Export Support Programs F Sig. Group 1 Mean 3.07 6.798 .011

AWRG

AWRN

Group 2 Mean Group1 Mean Group 2 Mean

3.92 1.19 1.83

5.803

.018

Again, results support the hypothesis. There are significant differences of the kind expected between more and less experienced owners in terms of their awareness of both general programs and programs designed for firms that are at the outset of developing their exporting activity. It is worth noting that, for both groups, there is a rather low mean level of awareness for programs for new exporters. This means that usage rates will perforce be very low, because firms cannot use export support programs of which they are unaware. Hypothesis 5 states that, among SME owners aware of export support services, firms led by less internationally experienced owners will be more likely to try to use export support services than are firms led by more experienced owners. Table 5 shows the ANOVAs used to test this hypothesis. These results are only partially supportive of Hypothesis 5. While the nature of the differences is as predicted for both type of programs, there is a significant difference between the lower and higher experience level groups only for general programs. The lack of a significant difference between the two groups in terms of usage of the programs targeted at new exporters is most likely attributable to the very small percentage of SME owners of any kind who reported using the programs.

USEG

Table 7: ANOVAs Reflecting Usage of Export Support Programs F Sig. Group 1 2.9 8.670 .006 Mean Group 2 1.2 Mean

USEN

Group 1 Mean Group 2 Mean

1.6 1.0

.564

.472

Implications for Marketing Export Support Services

The results discussed above are summarized in Table 8. Collectively, they indicate that the international experience of SME owners could usefully be added to existing segmentation bases for SME export support programs. That is, public programs that currently target firms based on stage of export development could tailor certain portions of the marketing mix according to the experience level of firms owners. It must be noted that the results here do not, and are not intended to, suggest that current segmentation and targeting practices should be abandoned. Rather, they suggest that these practices can be supplemented by taking into account the experience of owner (and of other top managers) as well as the stage of export development of the firm. Insert Table 8 about here

The findings here support and extend those of Gray (1997), who studied export managers in non-owner managed mature firms and who advocated segmenting based on the experience of the employee most directly responsible for exporting. Taken together with theories regarding the firm-level impact of the experience of owners of young and small firms (cf Reuber and Fischer 1999), and with much of the research on the internationalization of such firms (for a recent review see Coviello and McCauley 1999), these findings support the idea that in SMEs, where the owner has an influence on every

aspect of firm behavior, it is practical, and even critical to take the owner into account if attempting to categorize the firm with respect to its potential strengths, weaknesses and needs.

Implications for Export Support Program Managers Though the findings of this paper must be regarded as provisional, they do suggest that supplementing current segmentation bases by adding an additional basis owner experience may be warranted. In practice, this will mean that elements of the marketing mix of programs targeted at new exporters would be the most likely candidates for modification, and that eligibility criteria for a range of programs might be re-examined. We discuss the management of programs targeted at new exporters first, and then discuss eligibility criteria. There are four generic elements of a marketing mix that can be modified in order to increase suitability of an offering for a target market: the product/service mix; the communications associated with that product/service; the distribution of the product/service; and the pricing of the product/service. If providers of export support programs targeted at new exporters were to modify their practices and take into account the experience levels of owners and managers, it is likely that some changes would result in three of these: the product/service offerings, the communications tactics, and the distribution approaches used. The product service mix could be re-examined in light of the additional segmentation basis suggested here (owners experience) such that programs are evaluated as to their relevance for firms with no track record of exporting versus their relevance to managers with no exporting experience. Those programs relevant to experienced owners

are likely to be a subset of the available programs for firms that have not previously exported: in particular, basic training programs might be better suited to inexperienced individuals who are starting to export than to experienced individuals who are leading new firms to start exporting. Modifications to existing elements of service delivery would be appropriate in those situations where service providers offer advice to prospective clients as to what programs are likely to be of assistance. Inexperienced individuals should likely be counseled to take advantage of the full range of available programs, while experienced individuals leading firms that have not previously exported could be efficiently directed toward those programs that offer assistance other than training. Communications strategies could be revised by ensuring that all print and electronic descriptions of programs indicate whether they are likely to be relevant for people without prior experience or more broadly suited to firms that are new exporters. The titles and descriptions of programs that are listed on web sites or in brochures could thus could help decisions makers choose to pursue programs that are well suited not only to their firm, given its export profile, but also to their management team, given its experience profile. Distribution practices could be broadened if the additional segmentation basis were taken into account. The operating assumption behind many existing programs is that firms must gain a domestic track record before they are likely to be ready to consider exporting. However, the past international experience of a new firms owner or management team may mean the firm is export-ready at, or soon after, start-up. This would suggest that information about export support programs should be distributed to

firms as early as possible, and that channels that will reach firms that are very new should be added to existing channels. In addition to re-examining the product-service mix and the communication and distribution tactics used for programs targeted at new exporters, service providers might also want to re-examine the eligibility criteria for existing programs. This will apply in cases where firms are required to have a domestic track record or where owners are expected to have taken basic trade training courses before they are eligible for certain programs. It may be warranted to broaden the eligibility criteria for such programs to be so that the experience of the owner or the management team is taken into account. Providing that firms meet other eligibility criteria (such as having a business plan and a marketable product) exceptions could be made for firms that fail to meet experience criteria if owner-managers have export experience acquired in previous businesses. Two practical suggestions of a more general nature can also be made. Organizations seeking to provide export support services that will reach those who need it and be valued by those who use it, should, when constructing client databases, routinely collect information on owners export experiences as well as on the firms export activities. Further, service providers interacting with SME owners should take account of the owners export experience in order to avoid situations where clients get turned off because services that are available seem too basic for their needs. It is worth noting that none of the practical implications recommended here require major new initiatives on the part of export support service providers. Rather, these suggestions are geared toward increasing the effectiveness of and client satisfaction with current programs.

Before concluding this paper, it is appropriate to note its limitations. The fact that the sample was not drawn randomly from a known population is a clear limitation of the paper. Since no inventory of the population of relevant firms is available, this limitation is unavoidable. However, it does mean that the results should be generalized to other Canadian firms with caution. Another obvious limitation of the paper is that is based solely on Canadian data. As a result, the findings here should not automatically be assumed to generalize to other countries. At a minimum, however, the study is useful for sensitizing export support service providers to the possibility that their services should be targeted based on experiential characteristics of individuals as well as on characteristics of firms.

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Construct

Table 1: Summary of Constructs and Measures Used Measures Mean S.D. EXPLENGTH: # yrs business experience in export related work EXPRELEV: relevance of prior
work to decision to export

Range 0 to 35 1 to 5 1 to 5 1 to 5 1 to 5

International Experience of Owner Managers

6.1 2.5

7.1 1.5 1.1 1.4 1.4

Perceived Role of Exporting IMPSALE: extent to which reason 4.2 for exporting was growing sales IMPCOMP: extent to which reason 2.0 for exporting was competition Attention to Key Information Sources BUSASINFO: importance of info from business association and associates INDPBINFO: importance of info from industry publications VISITINFO: importance of info from visits to foreign markets Network-Related Barriers Recognized PARTNER: significance of barrier to finding local partner NETWORK: significance of barrier of lack of network Awareness of Export Support Programs AWRG: awareness of general programs AWRN: awareness of programs targeted at new exporters. Use of Export Support Programs USEG: use of general programs among those aware of them 3.6

2.9 3.7 3.0 2.8 3.1 1.4 1.8

1.39 1.4 1.6 1.5 1.7 1.3 3.2 1.6

1 to 5 1 to 5 1 to 5 1 to 5 0 to 5 0 to 4 0 to 5 0 to 4

USEN: use of programs targeted 1.4 at new exporters among those aware

Table 2: Comparison of Clusters on Key Variables Measures EXPLENGTH: EXPRELEV: IMPSALE: IMPCOMP: BUSASINFO: INDPBINFO VISITINFO. PARTNER NETWORK AWRG: AWRN: USEG: USEN Lower Experience Mean S.D. 4.8 1.5 4.0 1.7 3.2 2.5 3.5 2.6 2.3 3.1 1.2 2.9 1.6 4.6 0.8 3.0 1.5 2.9 2.1 2.4 2.2 2.0 3.0 1.1 2.0 1.7 Higher Experience Mean S.D. 8.4 4.3 4.6 2.7 3.9 3.2 4.0 3.3 2.9 3.9 1.8 1.2 1.0 4.8 0.8 3.2 2.0 3.5 2.7 2.7 2.6 1.8 2.9 1.4 1.1 1.0

Table 8: Summary of Hypotheses and Results of Hypothesis Tests

Hypothesis Number 1Compared with owner-managers who have greater levels of Results

Supported

international experience, owner-managers with lower levels of international experience will be less likely to view the development of export markets as a competitive route to growth
2Compared with owner-managers who have greater levels of Partially Supported

international experience, owner-managers with lower levels of international experience will pay less attention to valuable sources of business information related to exporting.
3Compared with owner-managers who have greater levels of Supported

international experience, owner-managers with lower levels of international experience will be less aware of networkrelated barriers that may prevent the development of greater export intensity.
4Compared with owner-managers who have greater levels of Supported

international experience, owner-managers with lower levels of international experience will be aware of fewer available export support services.
5Among owner-managers aware of export support services, Partially Supported

firms led by less internationally experienced ownermanagers will be more likely to try to use export support services than firms led by more experienced ownermanagers.