Ellis, P.D. & A. Pecotich (2001), “Finding international exchange partners: The role of social ties,” Global Focus, 13(2): 121-133.

Finding International Exchange Partners: The Role of Social Ties Paul Ellis Associate Professor Department of Business Studies, Hong Kong Polytechnic University, Hung Hom, Kowloon, Hong Kong Tel: (852) 2766 7108; Fax: (852) 2765 0611 Email: [email protected]

Anthony Pecotich Associate Professor Department of Information Management and Marketing The University of Western Australia, Nedlands, Western Australia 6009 Tel: (089) 380 2892, Fax: (089) 380 1004 Please address any correspondence to Paul Ellis at the address above.

Paul Ellis is Associate Professor, Department of Business Studies, Hong Kong Polytechnic University. He received his doctorate in international marketing from the University of Western Australia in 1996. His research interests concern the underlying social structure of international expansion decisions. He is currently involved in research projects examining the role of trading companies on host country development, systemic collapse in tightly-coupled systems, and the adaptive strategies of international trade intermediaries. His research has either appeared or is forthcoming in Journal of Marketing Research, Journal of International Business Studies, Journal of Management Studies, International Marketing Review, Business Horizons, Journal of Contingencies and Crisis Management among other journals. Antony (Tony) Pecotich is Associate Professor, Department of Information Management and Marketing at the University of Western Australia. He has received a MSc and PhD in Marketing from the University of Wisconsin - Madison. Dr Pecotich has consulted and taught extensively in Australia, USA, Europe and Asia. He has consulted for such corporations as Asia Pacific Breweries (S) Pte. Ltd., Capitol Motors (Mercedes Benz) Inc., Taiwan, Hong Kong Bank (Malaysia), Kao (S) Pte Ltd., and Telekom Malaysia. He is currently involved in research projects on: market developments and banking in Vietnam; market developments in China; and cross-cultural aspects of language and motivation in selected Asian nations. His publications have appeared in such journals as the Journal of Marketing, Journal of the American Society for Information Science, Journal of Applied Social Psychology, Journal of Public Policy and Marketing, the Journal of Retailing and Consumer Services, and Marketing Letters.

Finding International Exchange Partners

2

Finding International Exchange Partners: The Role of Social Ties Abstract Despite considerable research effort, little is known about the actual ways in which international exchange partners are identified. This paper critically assesses the contribution made by studies emphasizing decision-maker attitudes towards foreign markets and concludes that such approaches are fundamentally flawed by virtue of (a) their exclusive focus on potential exporters and (b) their inability to explain how, in the event of a favorable orientation, foreign partners come to be identified. By drawing on insights from diffusion research and social network theory, an original explanation based on existing social ties is developed and then evaluated in light of available evidence. Key Words internationalization, foreign market entry, exports, social ties

Introduction Internationalization process research has been a hotbed of research activity since the mid1960s with volumes of studies published describing the motives and mechanisms behind the firm's increasing involvement in international markets. A recent review of export marketing literature, published in the International Marketing Review, heralds "the general maturity within the field" despite acknowledging oft-heard indictments relating to the fragmented nature of research agendas and the absence of grounded conceptual frameworks. 1 But even a cursory glance at the main findings uncovered in this collective and long-term research endeavor reveals a number of gaps in the body of existing knowledge. Perhaps one of the most significant knowledge gaps is found at the very beginning of the internationalization process (IP) and concerns the issue of partner identification. Prior to the publication of another oft-cited review in the International Marketing Review in 1989, only one study had been specifically concerned with the initial decision to export. 2 Although there is substantial empirical work indicating the importance of developing buyer-seller relationships generally, little is known about how those exchange relationships are formed in the first place. 3 In the last ten years the situation has barely improved prompting one scholar to note that "research on the subject is still at the identification and conceptualization stage, due to incomplete conceptual foundations, unsophisticated methodologies and inconsistent research findings." 4 Recently calls have been made for more research into the initiation of international exchange relationships with emphasis on both the exporter and importer sides of the transaction. 5 Based on the earlier criticism, it seems apparent that research into this understudied topic must be based on a solid conceptual foundation. It is the articulation of such a foundation that describes the raison d'être of this paper. The paper is presented in three parts. In response to the charge that export researchers tend to neglect the findings of previous studies,4 the first part of the paper reviews the rise and fall of a popular construct long-held to be associated with the propensity to export, namely, the foreign market orientation of the decision-maker. The evolution of this intuitively appealing construct is traced from its origins through to its recently exposed limits. In the middle part of the paper three necessary but not sufficient antecedents of export

Finding International Exchange Partners

3

initiation are identified. Of these, the awareness of foreign market opportunities is deemed to be preeminent. Drawing on insights from diffusion research and social network theory, an original explanation for export initiation is then developed. Next, and again prompted by the unnecessary duplication of research in the field, the proposed relationship is compared against existing empirical findings. Finally, some further directions for research and implications for managers are identified. Background The Dependent Variable In much existing internationalization process (IP) research, scholars have adopted the propensity to export as the variable of interest. The goal has been, therefore, to uncover associative relationships with various determinants such as firm size, managerial commitment, competitive pressures, and so on.2 However, the propensity to export, which merely denotes a managerial inclination, can be clearly distinguished from actual export initiation. It is eminently feasible for a motive to be present with no exports taking place. 6 The question then arises that, given the motivation for exports, how do firms come to make the first decision to actually begin exporting? In terms of the overall process of internationalization, this decision signals the commencement of the firm’s business activities in a new foreign market. In the main, two approaches to this question can be found in the literature. The first approach emphasizes those external attention-evoking factors presumed to stimulate an information search on the part of the firm regarding opportunities abroad. 7 The reasoning here is straightforward: "Given that there are sufficient stimuli, decision-makers in a nonexporting firm may become interested in exporting and may engage in subsequent evaluation of the desirability of exporting for their firm". 8 In contrast, the second approach emphasizes factors internal to the firm, chiefly, decision-maker perceptions. This view is based on the assumption that no matter how potent, export stimuli are only relevant to the extent that they are perceived to be important or interesting by the decision-maker. 9 Given the significance of managerial perceptions in decision-making, the task becomes one of explaining how perceptual differences influence the initial decision to export. In other words, the dominant logic in the early IP literature was that attitudinal differences affect responses to export stimuli and subsequent export behavior. 10 The Export Decision Many researchers have considered the initial decision to export as being analogous to the adoption of an innovation. The initial entry into a new market is an innovation in the sense that it is a new or novel marketing experience for the firm. 11 This analogy was first made in a study reported by Ken Simmonds and Helen Smith who reasoned that insights gleaned from the study of the diffusion of innovations could legitimately be applied in the context of initial exports: "Entry into the export market is just as much an innovation as the adoption of a new production process, for example, so there is every reason to suspect that many of the findings concerning other types of innovation will apply to it". 12 Labeling the decision to export an innovation implies that the decision-maker is an adopter of that innovation, and consequently many studies have attempted to measure the relationship of certain decision-maker characteristics with the propensity to export.10 Typically such studies have considered those personal characteristics for which there is strong empirical support in the diffusion literature of an association with innovativeness, such as age, the level of education achieved, and risk tolerance and venturesomeness. 13

Finding International Exchange Partners

4

Of all the individual characteristics studied, the degree of international orientation or predisposition of the decision-maker seems to be particularly relevant to the initiation of exports and consequently it has received the most attention in the literature (see, for example, the studies listed in the Table). The international orientation of the decision-maker is perceived as being the most salient of all personal traits for it suggests that the individual with a "high degree of international orientation will have a higher probability of being exposed to attention evoking factors and of perceiving them". 14 First popularized by Nordic researchers in the late 1970s, the international orientation concept was justified on the premise that an individual’s perceptions are generally governed by that individual’s field of vision or direction of attention. In other words, the probability that the decision-maker will both perceive and act on information about export opportunities was seen to be related to the "extent he perceives and considers what happens outside his own country as interesting". 15 Foreign Market Orientation A key paper by Stan Reid published in the Journal of International Business Studies in 1981 introduced the concept of a foreign market orientation in an attempt to bridge the gap between the idea of an international orientation and the more established notion of psychic distance.10 In that paper it was theorized that a decision-maker’s foreign market orientation would be manifested in two ways; (1) in terms of differences in the cognitive distance between alternative foreign markets (i.e., psychic distance), and (2) in terms of some generalized cognitive distance between the home market and all foreign markets (i.e., international orientation): this foreign market orientation thus acts as a funneling mechanism reducing the available market set to the evoked set and performs as a selective sensitizer. It establishes that group of markets from which the decision-maker would be perceptually biased toward receiving stimuli. (see Note 10, p.108)

Surprisingly, in his own research, Professor Reid chose to ignore psychic distance and simply measured those socialization differences among decision-makers thought to affect their knowledge of foreign markets. 16 Specifically, he measured their "international predisposition" (not their foreign market orientation) as indicated by foreign parentage, spouse, birth, and language. When he found no association between international predisposition and export entry, he concluded that his independent variable had been poorly specified. In contrast, later researchers did include indicators of psychic distance in their measures of foreign market orientation. For example, the premise of one early study was that decision-makers will have a low foreign market orientation if they display the following characteristics: (1) they view foreign markets in greater-than-average degree as strange in nature (psychic distance); (2) they do not speak any foreign language, seldom visit foreign countries, and have only a limited education (objective managerial characteristics); (3) they are rigid, resistant to change, and risk averse (subjective managerial characteristics); and (4) they display a negative attitude towards exporting as a company strategy (attitude toward exporting). 17 The intuitive appeal of the concept of foreign market orientation (and its thematic variations) is such that it has been included in more than two decades’ worth of research as a key decision-maker variable influencing export behavior (see Table). However, despite its face validity the concept has proven difficult to measure. Part of the problem stems from the conceptual breadth of the construct which necessitates the use of numerous indicators and a correspondingly large number of survey items. A more fundamental shortcoming of the

Finding International Exchange Partners

5

construct stems from its limited explanatory potential. After 20 years of conceptual development and refinement the only solid conclusion that can be drawn is that managers who "are not foreign market oriented... will... be less likely to participate in export activities than foreign market oriented colleagues". 18 This is not an especially insightful conclusion. Moreover, the observed association between foreign market orientation and export behavior cannot be used, on the basis of the cross-sectional methodologies adopted, to infer causality, a point to which we will return below. INSERT TABLE ABOUT HERE As it currently stands the concept of a foreign market orientation cannot be used for little more than providing yet another typology of decision-makers and possibly for targeting potential candidates for government-sponsored export promotion programs. Indeed, any attempt to improve the utility of the construct is arguably futile due to two fatal flaws. In the first place, the emphasis on the degree of orientation of the exporter cannot be used to account for the observation that a significant proportion of all new exports are initiated by people outside of the firm. 19 And in the second place, given a non-exporter with export potential (as measured by a relatively high degree of foreign market orientation), the question of how to identify buyers abroad remains. 20 In short, the foreign market orientation construct lacks predictive adequacy. At best it can only make associative claims about the psychic distance to a market and the propensity to export to that market. As such, the construct contributes nothing that has not already been known since the formative days of the Uppsala school. 21 Conceptual Development If the aim is to explain the initiation of international exchange relationships, it is useful to identify some important preconditions. At base the initiation of exports would seem to require the coexistence of three necessary but not sufficient conditions and the available literature seems to support this contention. For the purposes of simplifying the following discussion, it will be assumed that awareness of foreign market opportunities is the critical antecedent to exporting. This assumption follows a recent review of 35 studies investigating export barriers. In that study the author found that the most significant obstacle to exporting is "the availability of limited information to locate and analyze foreign markets". 22 International exchange thus will not occur until after the decision-maker perceives the existence of a viable opportunity in some foreign market, where "opportunity" in this case refers broadly to the unmet needs or wants of potential customers. To explain the process by which exports are initiated thus requires an understanding of how decision-makers come to learn of opportunities abroad. Insights from Diffusion Theory According to classic diffusion theory, at the awareness stage of the adoption process the adopter will learn of the new idea from external information sources via social contact. 23 If initiating an export strategy is analogous to the adoption of an innovation, as many international marketing researchers have contended, then the most significant personal trait is the decision-maker's degree of cosmopoliteness. Cosmopoliteness is important because it is explicitly concerned with how the individual comes to learn of the innovative idea or, in this case, the existence of the foreign market opportunity. Our central thesis, therefore, is that there is a relationship between the cosmopoliteness of the decision-maker and the perception of opportunities abroad. This proposed relationship is based on empirically-derived insights

Finding International Exchange Partners

6

relating to boundary-spanning communications behavior that were originally made by organization sociologists 24 and later added to by diffusion theorists. 25 In addition, recent developments in social network theory yield operational implications regarding the transmission of information about entrepreneurial opportunities that, with the exception of Simmonds and Smith's paper,12 have rarely been considered in international marketing. Professors Simmonds and Smith were the first to suggest that cosmopolite decisionmaker characteristics could be used to explain the adoption of an export strategy. They predicted an association between prior foreign travel, their measure of cosmopoliteness, and exports. Not only was the predicted relationship supported across their sample of nine exporting firms, but Simmonds and Smith also observed that the decision-makers as a group shared "an attitude of almost complete unconcern for national boundaries where business was concerned" (see Note 12, p.97). They labeled this attitudinal orientation towards the world beyond the host nation a "supra-national outlook" and this new construct became the harbinger of the many subsequent studies measuring the foreign market orientation (FMO) of decision-makers. Interestingly, many of the inherent shortcomings of the FMO construct can probably be attributed to the misinterpretation of Simmonds and Smith’s original paper. In their study they interviewed decision-makers who were already exporting and observed that such decision-makers possessed a high degree of supra-national outlook. (In contemporary vernacular these exporters displayed a high FMO.) However, and in contrast with later studies measuring the degree of FMO, Simmonds and Smith then provided case study evidence to show that the exporting behavior had been the result of this prior orientation. This is significant because subsequent studies measuring the association between the degree of foreign market orientation have generally failed to eliminate the very plausible possibility that the observed orientation is the result of the export behavior. Given the established efficacy of the cosmopoliteness-innovativeness link in diffusion research, it is hard not to be drawn to the conclusion that international marketing researchers have inappropriately operationalized this relationship in the context of foreign market entry, as evidenced by the limited explanatory potential of the various FMO studies. Such studies have generally neglected the underlying cosmopolitan connections that result from or amplify the decision-maker’s orientation to some specific external environment. This oversight provides a justification for a departure away from the FMO construct and a return to the original interpretation of the cosmopolitan construct. Social Network Theory and Bridge Ties Export initiation invokes an exchange process between individuals possessing complementary resources and information. Social network theory, which is explicitly concerned with information transmission via interpersonal networks, recognizes that social structure creates inefficiencies in the distribution of knowledge pertaining to market opportunities. 26 Whether a person knows about new opportunities is determined by the informational benefits of that person’s network. The diffusion of information depends on human interaction, but given that people linked within the same social cluster tend to know what others in their cluster know, the spread of information about new ideas and opportunities typically comes through those ties that link people in separate social clusters: "Such ties are essential to the flow of information that integrates otherwise disconnected social clusters into a broader society". 27 This idea formed the basis of Mark Granovetter’s classic "strength of weak ties" ideas. 28 In his Ph.D. research Granovetter found that information about job opportunities was, more often than not, acquired from acquaintances rather than close friends. 29 This occurred because "acquaintances are more likely than close friends to move in other social circles, and

Finding International Exchange Partners

7

thus are likely to have access to information one would not otherwise receive". 30 This led Granovetter to conclude that, because bridge ties tend to be weak (e.g., acquaintances rather than intimates), information traverses greater social distances and reaches more people via weak rather than strong ties.28 Recently, however, Ronald Burt, a professor of sociology and strategy at the University of Chicago, has argued that the strength of a network tie is not as important as its redundancy. Interpersonal ties are redundant to the extent that they connect people within the same social cluster, whereas non-redundant ties link people who would otherwise have no direct contact with each other. A non-redundant or bridge tie spans what Burt refers to as a structural hole or a gap between individuals with complementary resources or information. Burt reasons that, irrespective of "whether a relationship is strong or weak, it generates information benefits when it is a bridge over a structural hole" (see Note 27, p.28). Non-redundant bridge ties are the only connection between otherwise separate clusters of interconnected individuals. Such ties link the cosmopolites of diffusion theory with those external social groups to which they are oriented. Although the bridge tie may be considered the manifestation of the orientation, or vice versa, the two are inextricably linked. The key thing is that tie itself is the conduit over which information is disseminated across boundaries, while the orientation facilitates both the coding of information sent and the extrapolation of meaning from information received. By combining these two central insights of diffusion theory and social network theory, a testable implication for IP research emerges. If knowledge of entrepreneurial opportunities is contingent upon the informational benefits of one's social network, 31 and given that the spread of information on new ideas comes through those ties that connect people in different social clusters, it follows then that information regarding foreign market opportunities will tend to be communicated via those existing bridge ties linking decisionmakers with distinct social clusters abroad. In other words, exporters and importers will tend to identify potential exchange partners via their existing social ties. The are three immediate benefits for identifying a relationship between antecedent social ties and an awareness of export opportunities. First, the proposed relationship is a more parsimonious alternative to the associative claims of FMO-boosters. 32 All things being equal, simpler explanations are better. Methodologically, and in contrast with the convoluted approaches to measuring FMO, it is a relatively straightforward matter to assess the empirical veracity of the hypothesis implied here: either the export opportunity in question was communicated via antecedent ties or it wasn't. There is little room for equivocation. Second, an explanation based on social ties offers potentially more utility and precision than the intuitively-appealing but slippery construct of psychic distance which, changes in response to the "development of the communications system, trade, and other kinds of social exchange" (see Note 21, p.32, emphasis added). 33 Finally, the claim that social ties are instrumental in identifying foreign opportunities is one which sits well with the not inconsiderable body of anecdotal and case study evidence reported in the literature that has hitherto been largely discounted as anomalous behavior. It is this body of available evidence to which we now turn. Empirical Review One aim of this paper is to draw some closure on three decades' worth of research investigating export initiation. Thus far, the review has been largely unflattering in its assessment of the state of conceptual progress in the area. However, in light of the extensive empirical work represented in existing studies, it would be remiss to proceed with a new agenda for research without due consideration for the evidence already on hand. Although the

Finding International Exchange Partners

8

bulk of existing research has been geared towards identifying the drivers of firm internationalization and, as such, has generally not considered the fundamental question of export initiation, there is arguably sufficient available evidence to indicate the desirability of further research into the role of antecedent social ties. This body of evidence can be divided into two camps: (1) information-rich case studies, and (2) large scale surveys investigating the importance of various sources of information germane to the export decision. The Case Studies Several case studies have revealed a connection between antecedent social ties and export initiation. For example, in a review of different approaches to international market selection, one scholar refers to an unspecified case whereby a Swedish firm began exporting to Switzerland "for the simple reason that the owners had relatives there and saw the opportunity of more frequent contact with them as a useful by-product of export activity." 34 A similar family tie was instrumental in the entry of a Hong Kong watchmaker into an ASEAN country in another study. 35 In contrast, a different type of interpersonal tie was observed in two case studies of Swedish technical consultants. For example, in one case "the internationalization in the beginning years took place with the assistance of established relationships with other Swedish firms". 36 Existing ties with network firms also played a role in the internationalization of the four New Zealand software developers, leading the authors of this study to conclude that "overall, the case findings indicate that the internationalization decisions and growth patterns of small software firms… are very much shaped by their network of formal and informal relationships". 37 The Surveys While case studies can provide a detailed insight into the information exchange process preceding exports, survey research is generally more limited to classifying alternative information sources according to their perceived importance in the search for export opportunities. Nevertheless, the available evidence clearly indicates the importance of prior social ties. For example, a study of the 1992 recipients of the Queen’s Award for Export Achievement, found that respondents rated interaction and discussions with channel members as their most valuable sources of information. 38 This corroborated an earlier study of Award winners which found that information gleaned from distributors and agents was rated higher by respondents than other sources (e.g., government agencies, in-house researchers) in searching for export opportunities. 39 Similarly, in a study of New Zealand exporters, "the single most important source of market information was informal discussions with overseas distributors, followed by other channel members…" 40 More recently, in a survey of 46 Dutch exporters published in the European Journal of Marketing, more than half of the respondents placed high emphasis on informal sources of information such as acquaintances when entering emerging markets. 41 Arguably the most significant piece of research in this group is a large-scale survey of 8,810 Italian manufacturers published in the Journal of International Business Studies. In this study the search activities of exporters were analyzed and it was found that local decision-makers "strongly prefer personal and direct sources of information…(because) face to face contacts with other entrepreneurs or colleagues are perceived as the most reliable and least expensive information sources." 42 Recent Research Findings These extant findings, drawn from diverse geographical and industrial settings, cannot be easily dismissed. Yet, until recently, there was no available research explicitly investigating the role of prior social ties on export initiation. This can perhaps be attributed to the messy

Finding International Exchange Partners

9

nature of international exchange. 43 Initiating exchange across national borders is an inherently complex social activity that often appears at first glance to be "lacking in rhyme or reason". It is no wonder that the systematic advance of research has generally followed the line of least resistance by adopting a complexity-reducing focus on the identification of those decision-maker traits associated with the propensity to export. But the trade-off has come at the cost of limited conceptual progress. While we know a good deal about the types of information considered useful by exporters, a number of questions remain unanswered including: "exactly how do individuals within the firm acquire appropriate information?" and "what are the connecting paths (networks) for information transfer?" 44 Such questions cannot be easily addressed via mail surveys. If the aim is to develop contextually embedded accounts of highly idiosyncratic foreign market entries, a more appropriate strategy is to rely on qualitative data collection methods, such as the use of personal interviews. 45 This approach was used in two recent papers which examined the role of social ties in the formation of international exchange relations. Significantly, both papers report similar findings despite drawing on evidence from dissimilar populations of exporters. In the first study, which was published in the Journal of Marketing Research, data were collected from a small sample of small- to medium-sized Australian exporters; 46 in the second study published in the Journal of International Business, data were collected from a large sample of Hong Kong toy-makers ranging in size from 100 to 10,000 employees. 47 The Australian Study In this study, 31 foreign market entries observed in an industrially diverse sample of eight exporters were classified according to four different initiation scenarios; seller (or exporter) initiated, buyer (or importer) initiated, third party initiated, and exports resulting from chance encounters at trade fairs.46 Not counting two trade fair initiations, some role for prior social ties was observed in every single market entry studied. The extent of influence on export outcome was gauged on a four point scale depending on whether such ties had led to the actual identification of the foreign exchange partner (strong influence) or had played a more partial role, for example, steering the decision-maker towards a particular foreign market or channel of distribution (weak and moderate influence respectively). For example, a strong role was ascribed in the case of the lens manufacturer's entry into the New Zealand market which came about as a direct result of the connection with one of the exporter’s exapprentices, who happened to be a New Zealander now working in the target market in Wellington. As this exporter explained, the firm began exporting to New Zealand because: I knew someone who went over there - a friend of mine. He was my source of contact. Again it’s a very close industry. You know somebody who moves over there and they help promote the product and get it out there and help you out.

Across the entire sample, a strong role for existing social ties was observed in four-fifths of the non-trade fair initiated FMEs. Thus the case study evidence was deemed to constitute strong support for the predicted relationship between decision-maker cosmopoliteness and foreign market entry. The Hong Kong Study In a follow-up study conducted in Hong Kong, in-depth interviews were conducted to collect data on 133 foreign market entries from a sample of 42 highly-internationalized toy manufacturing firms.47 During the interviews, which were conducted in Cantonese before subsequent translation into English, respondents were asked to list their foreign markets in order of importance. Next, the historical details relating to each market entry were solicited with particular attention given to the question of how the exchange parties first made contact.

Finding International Exchange Partners

10

Unlike the Australian study, no role for existing social ties was recorded unless it could be clearly demonstrated that such ties had directly influenced the specific identification of the exchange partners. In addition, data were collected relating to 128 indirect market entries involving outside agents such as local trading companies. The decision to include these indirect entries was made because middlemen often played an important first step in the overall internationalization of the firms in the study. For example, in a number of cases an indirect customer later became a direct importer. The indirect and direct entries were thus connected via common personalities: to explain the direct entry sometimes required an understanding of an earlier indirect entry. As with the Australian study, the larger scale replication study revealed that social ties played a pervasive role in the search for exchange partners. For seller-initiated exports, social ties influenced 86 per cent and 64 per cent of the direct and indirect market entries respectively. (For indirect exports, informants were asked how they came to select a local export intermediary.) Moreover, the use of social ties was broadly correlated with the age and experience of the informant with older toy-makers more reliant on interpersonal networks than their less-experienced, though better educated counterparts. Conclusions and Directions for Further Research The initiation of international exchange relationships is an important if seldom-studied research topic. To date, there has been considerable research effort expended in the empirical pursuit of a hypothesized relationship between the foreign market orientation of the decisionmaker and subsequent export behavior. This pursuit has not borne much fruit and arguably never will, given the inherent limitations of the question being asked. An alternative approach, identified in this paper, draws on established insights from diffusion research and social network theory to suggest that the search for international exchange partners is circumscribed by the social network of the one who searches. Although the question is largely novel, there is some evidence to support the contention that decision-makers tend to follow the line of least resistance abroad by drawing on their existing connections with others. However, further research, conducted in a variety of settings, is needed before firm conclusions can be drawn. Additionally, research could be conducted to see if the proposed relationship is evident for service exports. The internationalization process of service firms is unique in the sense that it may involve secondments or the semi-permanent migration of staff in order to develop "face to face contacts" in the foreign market. 48 Consequently, for such firms the social context of international exchange may be even more important than for exporters of physical goods. Finally, it might be interesting to investigate whether a relationship between cosmopolitanism and international trade exists at some macro level. Existing studies investigating the relationship between ethnic diversity in a nation and export participation are suggestive of a broader role for cosmopolitanism. 49 Migrants are cosmopolite in the sense that they arrive in a new land with family ties and business connections to their countries of origin. Such ties with the home country might be expected to positively influence the propensity to export. However, extant empirical work in this area has suffered from a lack of a conceptual framework for analyzing these relationships. As others have observed: …the argument of a direct link with export markets based on family, linguistic, business and cultural ties, although intuitively appealing, has not been subject to systematic examination in terms of either theory or evidence. Such links are not necessary for a country to become a successful exporter but if they are present, as in Australia, there is a case for trying to understand the processes operating, their importance and how they can best be encouraged and exploited in the trading context…. An underlying model or framework which focuses on the

Finding International Exchange Partners

11

potential causal relationships appears necessary in order to initially establish the process through which cultural and language ties can generate increased exports. 50

Implications for Managers Despite the claims of government agencies and marketing researchers to the contrary, social ties are a valuable source of rich information about foreign market opportunities - and managers know it. Given the choice between formal market research and informal discussions with "those in the know", most decision-makers opt for the latter. For example, in the Australian study one highly successful exporter was asked if she had ever conducted a systematic evaluation of export alternatives before entering a new market. She replied: "Prior to going to New Zealand I had actually engaged (a government agency) to do market research for us which was very very very underwhelming and unsuccessful and I would never embark on that endeavor again" (see Note 46, p.?). Decisions are more complex and outcomes are more uncertain when entering a foreign market. Such realities conspire to increase the costs incurred in searching for suitable exchange partners. However, there is growing evidence to suggest that relying on existing ties with others can lower the inherent risk and uncertainty associated with entering a foreign market. Consequently, and in spite of the traditional emphasis in the literature on formal scanning and market research, decision-makers should be encouraged to capitalize on their interpersonal ties with others when going abroad. Decision-makers can compensate for their lack of contacts with potential buyers by hiring cosmopolite staff or by employing knowledgeable brokers with established networks abroad. The social context relevant to foreign market entry creates a role for a unique kind of entrepreneur, the cosmopolitan broker or tertius who profits from the disunion of others (see Note 27, pp.30ff). A good illustration of hiring a cosmopolitan broker to facilitate entry into foreign markets is provided by Tiger Engineering, manufacturer of the world's largest wheel dozer. 51 Tiger regularly engages the services of either Australian miners working abroad "you’ll find Australians in the mining business are spread world-wide" - or foreign nationals with mining experience. The strategy is, we like to send somebody - a local - in on the ground first: Put him in there for 12 months, or longer... He’s a local who speaks the language, that knows the customs, that eats the same food, that can go into Venezuela (for example) and become one of the general people that are in Venezuela or Chile or whatever, and get him to sus out all the prospects, the good mines, the mines that are making money, the mines that are going broke, the customers that are basically honest and dishonest, those that are large enough... (see Note 51, p.285)

These biculturally competent scouts used by Tiger are typically identified through the firm’s network of contacts within the industry. As Tiger’s general manager explained: The mining industry’s pretty small - in the world. You’ll find people are very well informed in the mining industry.... You find that people have worked 20 mines around the world that just keep moving around - a couple of years here, a couple of years there - and it’s a network of old boys I suppose. (see Note 51, p.285)

Ideally, though, managers should be encouraged to invest in and develop their own social networks. Others have recognized the value of interpersonal networking as a key activity for the entrepreneur. 52 For similar reasons, the development of heterogeneous and informationrich networks seem appropriate for decision-makers searching for export opportunities.

Finding International Exchange Partners

12

TABLE: Foreign Market Orientation Studies Study

Construct

Conceptual definition

Operational definition

Simmonds & Smith (1968)

supra-national outlook

‘an attitude of almost complete unconcern for national boundaries’ (p.97)

*

Olson & Wiedersheim-Paul (1978) / Wiedersheim-Paul et al. (1978)

international orientation

the extent the decision-maker ‘perceives and considers what is happening outside his own country as interesting’ (p.293)

NA (theoretical framework only)

Reid (1981)

foreign market orientation

a measure of the perceived difference between the home market and foreign markets and between foreign markets themselves, in terms of economic, cultural, political and market-strategic dimensions (1981, p.107)

NA (theoretical framework only)

______ (1984) international predisposition

measured foreign market knowledge acquired by acculturation patterns including foreign birth and language ability

Dichtl et al. (1984) ______ (1986) ______ (1990)

foreign market orientation

psychic distance, subjective and objective managerial characteristics, attitude toward export

questionnaire & projective responses to hypothetical situations

Holzmuller & Kasper (1990)

foreign orientation

same definition as Dichtl et al.

same definition as Dichtl et al.

Lim, Sharkey, & Kim (1993)

international orientation

not defined

3 items measuring extent of interest & exposure to foreign affairs and extent of foreign travel

* Exploratory study only. Construct inferred on the basis of decision-maker attitudes observed in nine exporting firms. Sources: Dichtl, E., Liebold, M., Koeglmayr, H.G. and Mueller, S. (1984). The foreign orientation of management as a central construct in export-centered decision-making processes. In Gerald M. Hampton and Aart P. van Gent, editors, Marketing Aspects of International Business, Boston: Kluwer-Nijhoff, 119-141 Dichtl, E., Köglmayr, H.G. and Müller, S. (1986), “Identifying Export Potential: A Comparative Analysis of German and Japanese Firms,” Advances in International Marketing, 1, 233-254. Dichtl, E., Koeglmayr, H.G. and Mueller, S. (1990), International orientation as a precondition for export success, Journal of International Business Studies, 21 (First Quarter), 23-40. Holzmüller, H.H. and Kasper, H. (1990). The decision-maker and export activity: A cross-national comparison of the foreign orientation of Austrian managers. Management International Review, 30 (3): 217-230. Lim, Jeen-Su, Thomas W. Sharkey, and Ken I. Kim (1993), Determinants of international marketing strategy, Management International Review, 33, 103-120. Reid, S.D. (1981). The decision-maker and export entry and expansion. Journal of International Business Studies, (Fall): 101-112. Olson, H.C. and Wiedersheim-Paul, F. (1978), Factors affecting the pre-export behavior of non-exporting firms, in Michael Ghertman and James Leontiades (editors), European Research In International Business. Amsterdam: North Holland, 283-305. Reid, S.D. (1984), Information acquisition and export entry decisions in small firms, Journal of Business Research, 12, 141-157. Simmonds, K. and Smith, H. (1968). The first export order: A marketing innovation, British Journal of Marketing, (2): 93-100. Wiedersheim-Paul, F., Olson, H.C. and Welch, L.S. (1978), Pre-export activity: The first step in internationalization, Journal of International Business, 9, 47-58.

Finding International Exchange Partners

13

Notes

1

Katsikeas CS, Bell J, Morgan RE. Advances in marketing theory and practice. Int. Marketing Rev., 1998; 15(5): 322-332. 2 Aaby N.E., Slater SF. Management influences on export performance: A review of the empirical literature 1978-1988. Int. Marketing Rev., 1989; 6(4): 7-26. 3 See, e.g., Dwyer FR, Schurr PH, Oh S. Developing buyer-seller relationships. J Marketing, 1987; 51(April): 11-27. Heide JB, Miner AS. The shadow of the future: Effects of anticipated interaction and frequency of contact on buyer-seller cooperation. Acad Manage J., 1992; 35(2): 265-291. 4 Leonidou LC. Export stimulation research: Review, evaluation and integration. Int Bus Rev, 1995; 4(2): 133-56. 5 See, e.g., Leonidou LC, Kaleka AA. Behavioural aspects of international buyer-seller relationships: Their association with export involvement. Int Marketing Rev, 1998; 15(5): 373-397. Liang N, Parkhe A. Importer behavior: The neglected counterpart of international exchange. J. Int Bus Studies, 1997; 38(3): 495-530. 6 Bilkey WJ. An attempted integration of the literature on the export behavior of firms. J. Int Bus Studies, 1978; 9(1): 33-46. 7 See, e.g., Cavusgil ST. On the internationalisation process of the firm. European Research, 1980; (November): 273-281. Welch LS, Wiedersheim-Paul F. Initial exports - a marketing failure?, J. Manage Studies, 1980; 17(4): 333-344. 8 Cavusgil ST, Nevin JR. A conceptualization of the initial involvement in international marketing, in Charles W. Lamb and Patrick M. Dunne (editors), Theoretical Developments in Marketing. Chicago, IL: American Marketing Association, 1980. p.68-71. 9 See, e.g., Dichtl E, Köglmayr HG, Müller S. Identifying Export Potential: A Comparative Analysis of German and Japanese Firms. Adv Int Marketing, 1986; 1: 233-254. Miesenbock, KJ. Small business and exporting: A literature review. Int Small Bus J. 1988; 6(2): 42-61. 10 Reid SD. The decision-maker and export entry and expansion. J. Int Bus Studies, 1981; (Fall): 101112. 11 Lee WY, Brasch JJ. The adoption of export as an innovative strategy. J. Int Bus Strategy, 1978; 9(1): 85-93. Saimee S, Walters PGP, DuBois FL. Exporting as an innovative behavior: An empirical investigation. Int Marketing R., 1993; 10(3): 5-25. 12 Simmonds K, Smith H. The first export order: A marketing innovation, Brit J. Marketing, 1968; (2): 93-100. 13 See, e.g., Axinn CN. Export performance: Do managerial perceptions make a difference? Int Marketing R., 1988; (summer): 61-71. Reid SD, Mayer C. Exporting behavior and decision-maker characteristics. In Jones V., editor, Marketing 1980: Toward Excellence in the Eighties. Calgary, AL: Administrative Sciences Association of Canada, 1980; 298-307; Reid SD. Managerial and firm influences on export behavior. J. Acad Marketing Sci, 1983;11(3): 323-332. 14 Wiedersheim-Paul F, Olson HC, Welch LS. Pre-export activity: The first step in internationalization, J. Int Bus Studies, 1978; 9, 47-58. 15 Olson HC, Wiedersheim-Paul F. Factors affecting the pre-export behaviour of non-exporting firms. In Ghertman M, Leontiades J. editors, European Research in Int Bus. Amsterdam: North Holland, 1978; p.283-305. 16 Reid SD. Information acquisition and export entry decisions in small firms, J. Bus Res, 1984; 12, 141-157. 17 Dichtl E, Liebold M, Koeglmayr HG, Mueller S. The foreign orientation of management as a central construct in export-centered decision-making processes. In Hampton GM, van Gent AP, editors, Marketing Aspects of Int Bus, Boston: Kluwer-Nijhoff, 1984; 119-141. 18 Dichtl E, Koeglmayr HG, Mueller S. International orientation as a precondition for export success, J. Int Bus Studies, 1990; 21(First Quarter): 23-40. 19 Barker AT, Kaynak E. An empirical investigation of the differences between initiating and continuing exporters. European Journal of Marketing, 1992; 26(3): 27-36.

Finding International Exchange Partners

20

14

For Professor Dichtl and his colleagues this apparently does not present much of an issue. The tapping of export potential seems only to require the reduction of various export impediments (such as the perceived lack of price competitiveness and a shortage of qualified personnel). The reduction of such impediments requires some assistance from outside government agencies in the form of ‘special lectures, seminars, language courses, and fact-finding missions abroad’ (see Note 9, p.249), while the firms themselves are simply advised to display ‘more courage with regard to seeking access to foreign markets’ (see Note 18, p.38). 21 The Uppsala School refers to a stream of research that followed the publication of Johanson J. Wiedersheim-Paul F. The internationalization of the firm: Four Swedish cases. J. Manage Studies, 1975; (October): 305-322. 22 Leonidou LC. Empirical research on export barriers: Review, assessment, and synthesis. J. Int Marketing, 1995; 3(1): 29-43. 23 Rogers EM. Diffusion of Innovations. New York: Free Press, 1962. 24 See, e.g., Davis JA. Locals and cosmopolitans in American graduate schools, Int J. Comparative Socio, 1961; 2: 212-223. Gouldner AW. Cosmopolitans and locals: Toward an analysis of latent social roles - I (II), Admin Sci Quart, 1957; 2: 281-306 (444-480). Merton, RK. Social Theory and Social Structure. Glencoe, IL: Free Press, 1957. 25 See, e.g., Becker MH. Sociometric location and innovativeness: Reformulation and extension of the diffusion model, Amer Socio Rev, 1970; 35(2): 267-282. Robertson TS, Wind Y. Organizational cosmopolitanism and innovativeness, Acad Manage J., 1983; 26(2): 332-338. Tushman ML, Scanlan TJ. Boundary spanning individuals: Their role in information transfer and their antecedents, Acad Manage J., 1981; 24(2): 289-305. 26 See, e.g., Mitchell JC. The concept and use of social networks. In Mitchell JC., editor, Social Networks in Urban Situations: Analyses of Personal Relationships in Central African Towns. Manchester University Press, 1969 p.1-50. Rogers EM, Kincaid DL. Communication Networks: Toward A New Paradigm For Research. New York: Free Press, 1981. Weedman J. Informal and formal channels in boundary-spanning communication, J. Amer Soc Info Sci, 1992l (April): 257267. Weimann G. Social networks and communication. In Asante MK, Gudykunst WB., editors, Handbook of International and Intercultural Communication. Newbury Park, CA: Sage, 1989. p.186-203. 27 Burt RS. Structural Holes: The Social Structure of Competition, Cambridge, MA: Harvard University Press, 1992. 28 Granovetter MS. The strength of weak ties, Amer J. Socio, 1973; 78(6): 1360-1380. 29 Granovetter MS. Changing jobs: Channels of mobility information in a suburban community. Unpublished doctoral dissertation, Harvard University, Boston, MA, 1970. 30 Liu WT, Duff RW. The strength in weak ties, Pub Opinion Quart, 1972; 36: 361-366. 31 Burt RS. The contingent value of social capital, Admin Sci Quart, 1997; 42: 339-365. 32 The FMO construct is based on the premise that the probability of perceiving export stimuli is related to the degree of orientation to a particular foreign market (i.e., nation) as a whole. In contrast, the cosmopolitan construct is premised on the assumption that the awareness of foreign opportunities leading to exports is causally related to the actual and antecedent degree of social contact between the potentially transacting parties. That is, information regarding opportunities abroad is communicated to the initiating decision-maker via existing interpersonal social ties. 33 "Slippery" is an appropriate adjective for although psychic distance is an intuitively appealing construct, time and again it fails to be supported by hard evidence. For example, in their recent cross-national investigation of psychic distance, Stöttinger and Schlegelmilch found no evidence indicating a relationship with export performance prompting these authors to suggest the construct has passed its "use by date" (see Stöttinger B, Schlegelmilch BB. Explaining export development through psychic distance: enlightening or elusive? Int Marketing R., 1998; 15(5): 357-372). We tend to concur with Andersen's earlier comment that for international marketing research to progress to the next level of development, "a distinction should be made between the contribution to intuitive understanding and a scientific understanding" (see Andersen O. On the internationalization process of firms: A critical analysis, J. Int Bus Studies, 1993; 24(second quarter): 209-231.)

Finding International Exchange Partners

34

15

Papadopolous N. Approaches to international market selection for small- and medium-sized enterprises. In Rosson PJ, Reid SD., editors, Managing Export Entry and Expansion: Concepts and Practice, New York: Praeger, 1987. p.128-158. 35 Siu WS. International market entry strategies of Hong Kong companies: A case study approach. In McCarty DE, Hille SJ., editors, Research On Multinational Business Management and Internationalization of Chinese Enterprises, Nanjing University: 1993. p.308-315. 36 Sharma DD, Johanson J. Technical consultancy in internationalisation. Int Market Rev., 1987; Winter: 20-29. 37 Coviello N, Munro H. Network relationships and the internationalisation process of small software firms, Int Bus Rev, 1997; 6(4): 361-386. 38 Styles C, Ambler T. Successful export practice: The UK experience. Int Marketing R., 1994; 11(6): 23-47. 39 Brown R, Cook D. Strategy and performance in British exporters. Quart Rev Marketing, 1990; (spring): 1-6. 40 McDougall GHG. Small New Zealand businesses and exporting: Some observations. New Zealand J. Bus, 1991; 107-116. 41 Nijssen EJ, Douglas SP, Calis G. Gathering and using information for the selection of trading partners. European J. Market, 1999; 33(1/2): 143-162. 42 Bonaccorsi A. On the relationship between firm size and export intensity. J. Int Bus Studies, 1992; 23(4): 605-635. 43 Ellis P. Foreign Market Entry Revisited: Unresolved Issues, ‘Messy’ Research, and Old Conceptual Wineskins. Paper presented at the Academy of International Business Meeting, 7-11 October, 1998. Vienna, Austria. 44 Benito G, Welch L. Foreign marketing servicing: Beyond choice of entry mode. J. Int Marketing, 1994; 2(2): 7-27. 45 Personal interviews have been used in several studies of exporter behavior including Cavusgil ST, Zou S. Marketing strategy-performance relationship: An investigation of the empirical link in export market ventures. J. Marketing, 1994; 58(January): 1-21. Mattsson J. Initial penetration of European continental markets by small and medium-sized firms. Advances in International Marketing, 1986; 93-114. 46 Ellis P, Pecotich, A. Social Factors Influencing Export Initiation in Small and Medium-Sized Enterprises. J. Market Res, (forthcoming). 47 Ellis P. Social Ties and Foreign Market Entry. J. Int Bus Studies, 2000; 31(3): 1-27. 48 Farrell PN, Wood PA. International market selection by business service firms: Key conceptual and methodological issues. Int Bus R., 1994; 3(3): 243-261. 49 See, e.g., Lever-Tracy C, Ip D, Kitay J, Phillips I, Tracy N. Asian Entrepreneurs in Australia. Canberra: Australian Government Publishing Service, 1991. Stanton PJ, Lee J. Ethnic groups and Australian export performance. In Ryan JB, Gibson B., editors, The People Factor in Small Enterprises: Proceedings of the Joint SEEANZ and IIL Small Enterprise Conference, University of Newcastle: Institute of Industrial Economics, 1994. p.181-196. 50 Aislabie C, Lee J, Stanton J. Australian Cultural Diversity and Export Growth. Canberra: Australian Government Publishing Service, 1994; p.1-2. 51 Ellis P. Cosmopolitanism and the Marco Polo Effect: The social network determinants of exports in small- to medium-sized enterprises. Unpublished PhD dissertation, 1995. Dept. of Information Management and Marketing, University of Western Australia. 52 Birley S, Cromie S, Myers A. Entrepreneurial networks: Their emergence in Ireland and overseas, Int Small Bus J, 1991; 9(4), 56-74.

B-Paper: The Social Context of International Exchange

in the internationalization of the four New Zealand software developers, leading the .... A good illustration of hiring a cosmopolitan broker to facilitate entry into.

111KB Sizes 1 Downloads 181 Views

Recommend Documents

The Sociology of Unequal Exchange in Ecological Context: A Panel ...
forest resources, producing a flow of services and resources for human societies. ... for the lower-income countries remained below the global biocapacity per ... 6 Data for these well-being measures are obtained from the World Bank (2005).

The social context as a determinant of teacher ...
Sep 19, 2008 - been shown to be related to teachers' use of motivational strategies. Pelletier ... students with choice and a meaningful rationale). Nonetheless, ... are responsible for student performance standards, the more controlling they are ...

The social context as a determinant of teacher motivational strategies ...
Sep 19, 2008 - Within the SDT framework, the social context has previously been shown to be .... conducted all the interviews and was the only person to listen to them and ..... well at the same time and I'm on first name terms which gives.

The Context and Quality of Social Relationships Affect ...
Chimpanzees live in multimale, multifemale .... was based on the criterion that data be accumulated ..... female data sets, analysed separately); however, such.

The social context of neonatal pain - Clinics in Perinatology
aDepartment of Psychology, Life Sciences Centre, Dalhousie University Halifax, ... bSchool of Occupational Therapy, 5869 University Avenue, Forrest Building,.

The International Institute of Social Studies of the Erasmus University ...
The International Institute of Social Studies of the Erasmus University Rotterdam the Netherlands is seeking ... The International Institute of social Studies will appoint one Post-doc researcher, that will work in close ... You hold a doctorate degr

The International Medium of Exchange: Privilege and ...
Jun 29, 2017 - Re-writing in terms of interest rates and solving. 1 + i$. 1 + i€. = ... Higher asset price (lower interest rate). 3. Higher ... Financial Account Deficit.

Leveraging Social Context for Searching Social Media
Oct 30, 2008 - social media sites depends on providing tools that allow users to productively ... Social media is composed of multiple “social” data struc- tures that are ..... on Web Search and Data Mining, pages 183–194, New. York, 2008.

pdf-1456\constructions-of-deviance-social-power-context-and ...
... apps below to open or edit this item. pdf-1456\constructions-of-deviance-social-power-context ... 7th-seventh-edition-by-peter-adler-patricia-a-adler.pdf.

International Social Work
Page 1 ... International Association of Schools of Social Work · International Council .... be affected by trade, communications technologies, travel and. Midgley: ...

The Social Dynamics of International Organization ... - Brandon J Kinne
Defining IO membership as an affiliation network offers numerous benefits. First ... which focused on how international institutions—including but not limited to formal interna- ..... First, we consider degree-based preferential attachment, a so- .

The Social Dynamics of International Organization ... - Brandon J Kinne
Administration of the Turkic Culture and Arts. • Commerce. A commercial ij match ..... The theory of externalities, public goods, and club goods. Cambridge, UK: ...

International Medium of Exchange: Privilege and Duty
Oct 6, 2017 - situation describes the status quo in the data remarkably well. .... dollar-denomination on shock pass-through and expenditure switching when nominal .... Moreover, the 2015 ECB report on the international role of the euro.

Call for International Exchange Program.pdf
The applications are now open! ... Fields (The Fields Institute for Research in Mathematical Sciences), Canada ... Call for International Exchange Program.pdf.

International Social Work
sale and trafficking of children and child prostitution, particularly of girls (Worst Forms of ... systems, procedural requirements and the expense of bringing wit- nesses from ... customs surveillance, telephone help-lines, outreach, emergency shelt

Social Innovation Exchange Workshop - Women Development ...
Entrepreneurship, Strategic Management, Strategic Human. Resource Management, Growth & Technology Strategy,. Corporate Social Responsibility and Service Operations. Management. He advises Russian Government, British Council, UN Agencies I/NGOs as wel

Social Innovation Exchange Workshop - Women Development ...
... in 100 -150 words and tell us why you want to participate in this workshop. Email this form along with your passport size photograph to [email protected].

Adaptive specializations, social exchange, and the ... - Semantic Scholar
May 11, 2010 - In this view, human intelligence is more powerful than machine intelligence ... tioned benefit is access to the symphony; the requirement is payment of the ticket ..... one is looking for violations of the rule is to choose the P card.

Adaptive specializations, social exchange, and the ... - Semantic Scholar
May 11, 2010 - For psychology and the cognitive sciences, the intuitive view of ... tuted intelligence, then equipping computers with programs implementing these methods ... formed research; L.C. and H.C.B. analyzed data; and L.C., H.C.B., and J.T. w