The Impact of Internal Factors on the Export Success of Dutch Small and Medium-Sized Firms

Abstract

Because The Netherlands is a relatively small country and claims a socalled open economy, exporting is vitally important. In this empirical research, we study the success of small and medium-sized exporting firms in the northern part of The Netherlands. In this part of the country more than 95 percent of the firms can be classified into the category of small and mediumsized enterprises (SMEs). As Dutch SMEs have the potential for increasing exports (Van Elk, Hendriksen, and Overweel 1991), public policy aimed at increasing the export success of Dutch firms may very well focus on smaller-sized enterprises. However, SMEs have several specific export-related problems. These stem from the small scale of their activities. The financial possibilities, for example, of an SME will be more restricted than the financial possibilities of a larger firm. Furthermore, the manipulation of the foreign market is difficult for any firm, especially for the smaller ones. Internal managerial factors, such as the attitude towards export, are crucial for the export success of SMEs (Miesenbock 1988). Therefore, managers and policy-makers would be able to stimulate the economy considerably with decisions based on knowledge about the influence of internal factors on the export success of SMEs. By manipulating decisions of the management of SMEs, the export performance of these firms is likely to improve. But the impact of the various decisions is not very well-known. Thus, in order to be able to adjust the public policy and the policy of the firms themselves, it is necessary to increase the insight in the absolute and relative impact of alternative export policy instruments of an SME. Furthermore, the role of firm characteristics, which can not be used by the firm as export policy instruments, has to be considered. The purpose of this study is to identify to what extent internal managerial factors at SMEs contribute to their export success. The conclusions will be based on descriptive as well as explanatory analyses. ALTERNATIVE APPROACHES TO EXPORT SUCCESS Historically, a large number of studies have dealt with the question of what factors influence the export performance of firms (Aaby and Slater 1989, Bilkey 1978, Miesenbock 1988). The way this question has been approached differs considerably between the numerous studies. The alternative approaches can be classified on the basis of three criteria: whether the study considers exporting and nonexporting firms or only exporting firms; whether the purpose of the study is merely descriptive or explanatory; and whether external factors, internal factors, or both are considered. Aaby and Slater (1989), mentioned the first criterion to classify the approaches to study export success. A number of authors investigated the differences between exporters and nonexporters (Burton and Schlegelmilch 1987; Cavusgil and Nevin 1981; Christensen, da Rocha, and Gertner 1987; Keng and Jiuan 1988). Others measured the export success of exporting firms, and studied the relation between this measure and influencing factors (Cooper and Kleinschmidt 1985, Kirpalani and MacIntosh 1980, Madsen 1988, McGuinness and Little 1981). Although export success can be measured with one variable, it is more in accordance with the complexity of export success to construct a scale from a set of variables (Madsen 1988). Moreover, multi-indicator measures tend to be more reliable and have less measurement error than single indicator measures (Churchill 1979). Because the purpose of this study is to explain export success, we analyzed only exporting SMEs and measured export success with a multiple item set. Empirical studies can also be classified on the criterion of whether the main purpose of the study is to describe or to explain. In the first case, successful or unsuccessful exporting SMEs are described on the basis of a set of characteristics. If the number of firms is moderately large a clustering of firms is necessary before using a descriptive method. …