Antecedents of firm export performance: the role of export promotion programs

This study empirically investigates the direct and indirect effects of export promotion programs (EPPs) on firm export performance. Government export promotion programs normally define the premise for successful exporting activities of the corporate sector and play a key role in stimulating international business activities of firms (Cavusgil and Michael, 1990; Marandu, 1995; Seringhaus and Rosson, 1990). While the extant literature on export performance mostly neglected EPPs as an antecedent of export performance, the literature on export promotion fails to relate it to export performance. A very few researchers in this area have focused on a direct relationship between EPPs and firm export performance, however, no study has investigated the effect of EPPs on other determinants of export performance toward establishing any indirect relation between EPPs and export performance. This study attempts to develop and test a comprehensive model of firm export performance that investigates how EPPs directly and indirectly influence firm export performance. Theoretical foundations are drawn from internationalization process and resource-based theories as frameworks for the analysis of the study. The model integrates the use of EPPs, management perception of export market environment, export knowledge, export commitment, and export strategy that influence firm export performance and develops a number of hypotheses. Export promotion programs are classified into two categories according to their similarity of purpose- "market development", and "finance and guarantee" related programs. All other variables in the model are latent and are measured by a set of observed items. The model is tested on primary data obtained from a sample survey of exporting firms drawn from three major export oriented industries in Bangladesh. Structural Equation Modeling (SEM) techniques (in AMOS 5) are used to test the validity of the overall model and the relationship between variables hypothesized in the model. A two stage process is employed whereby the construct measurements are first evaluated, followed by an evaluation of the structural relationships. Analysis of the structural relationships supports most of the hypothesized relationships. The dimensions of export promotion programs are found to positively impact overall export performance. The research findings demonstrate that the use of market development-related export promotion programs influence firm export performance directly as well as indirectly through management perception of the export market environment, export knowledge and commitment. However, finance and guarantee-related export promotion programs indirectly influence export performance through export commitment. The study provides a guideline for managers of firms suggesting how they can benefit from EPPs in improving their positive attitude towards the export market environment, building their knowledge and enhancing commitment to exporting for better success in their international operations. This study provides guidelines to policymakers in designing and targeting export promotion programs effectively. The study also contributes to the literature by examining the indirect impact of EPPs on firm export performance. Finally, the limitations of the study are considered and possible directions for further research outlined.