A Study of Exporting and Non-Exporting Small Manufacturing Firms

ABSTRACT This study examines the export involvement of 118 small manufacturing firms in Wisconsin. A survey was conducted with small manufacturers inquiring about their planning activities, perceived competitive advantages, managerial attitudes, and size characteristics. A step-wise discriminant analysis was performed to address two basic and related questions: (1) Can a small manufacturing firm's export involvement be predicted based on a set of characteristics? (2) Which variables are most effective in discriminating between the exporting and non-exporting manufacturing firms? Research findings indicate that export behavior of small manufacturing firms can correctly be predicted. In addition, substantial differences occur between small exporting and non-exporting manufacturing firms from the standpoint of planning activities, perceived competitive advantages, managerial attitudes, and size. INTRODUCTION Many small firms in the United States are realizing that competing globally is no longer an option; it has become an imperative. According to a recent United States Small Business Administration (U.S.S.B.A.) study (1987), businesses with fewer than 500 employees accounted for more than 21 percent of the value of manufactured goods exported directly and indirectly by manufacturers. Furthermore, there is a reasonably well-supported belief that small firms exhibit a superior vitality demonstrated, for example, by their continual ability to create jobs. In the Great Lakes area, nearly 950,000 jobs depend on exports; 550,000 of those jobs are in manufacturing industries directly producing those exports. Small businesses were the source of 100 percent of the job growth in the region from 1982 to 1986. It is estimated that 32,000 small businesses in the leading exporting industries in the region have the capacity to export, but are not yet actively doing so (U.S.S.B.A., 1987). Therefore, the importance of involving more small firms in export activity cannot be overemphasized. This study has attempted to identify various factors which can explain the export involvement of small manufacturing firms. Once these differentiating factors are identified, they will aid public policy makers in developing foreign market involvement stimulation effort toward small non-exporting firms whose potential for exporting is high or who are planning for future foreign market involvement. Many researchers have attempted to identify various factors which influence a firm's involvement in exports. A review of the literature pertaining to firm export involvement shows that four categories of differences between exporters and non-exporters have emerged. Some of the major studies in the area are summarized and discussed below. REVIEW OF THE LITERATURE The literature on a firm's involvement in export can be classified into four categories: the size of the firm, the planning activities of the firm, the firm's perceived competitive advantages, and managerial attitudes with regard to exporting. The Size Characteristics Firm size is often regarded by export researchers as a critical structural determinant in the exporting activity of a firm (Abdel-Malek, 1974; Bilkey & Tesar, 1977; Cavusgil & Nevin, 1979; Christensen, da Rocha & Gertner, 1987; Gamier, 1974; Reid, 1982). Some researchers have used firm asset size (Drinkwater, 1971; Gamier, 1974); others have used the number of employees (Bilkey 4f Tesar, 1977; McConnell, 1979; Suntook, 1978); and yet others have used firm sales (Abdel-Malek, 1974, 1978; Czinkota, 1985). Cavusgil & Nevin (1981), and Cavusgil (1976) have employed all three measures and found that larger firms have a higher propensity to export. Reid (1982) has also concluded . that absolute size using traditional indicators predominantly affects the export entry into new foreign markets. This suggests that in small firms, export market expansion is strongly influenced by the presence of financial and human resources best represented by sales, assets, number of employees, and to a lesser extent, availability of a stock of managerial personnel. …