Public support for international business : an empirical study on the determinants of trade mission effectiveness

The present study examines empirically the determinants of oversea trade mission (TM) effectiveness. As a commercial diplomacy (CD) service TMs lend public support to domestic firms on the matter of entering foreign markets. A review of the pertinent empirical literature, investigating the influences of trade mission benefits and use for international private business activities, uncovered that this type of support has mainly been investigated before the background of export promotion, which focuses primarily on how the organizing public agencies can enhance the use of this service for firms. The perspective taken in this study is that of CD which views trade mission outcomes to be dependent on a process of co-creation between the service provider and the client stressing the importance of clients to be sufficiently prepared. Further, besides the use of firm level determinants of TM effectiveness, the uncovered paucity of prior research about individual level determinants led to the adoption of a multilevel approach to determine TM effectiveness. Effective use of TMs, as the used outcome measure, was operationalized as the identification of business opportunities through identifying business exchange partners in the targeted markets. Within TM research the identification of these partners is viewed as pre-sales activities leading to financial outcomes in the long-run. Moreover, the selected type of outcome measure is not only based in CD, which views TMs as networking activities, but it fits well with (international) entrepreneurship research, which is focused on the identification and exploitation of business opportunities. Suggestions made in prior TM studies that entrepreneurial participants in the missions might be more effective in their use of TMs was incorporated in the study by choosing entrepreneurial orientation (EO) dimensions on the firm level and cognitive style dimensions of firm representatives on the individual level. The firm and individual level determinants were defined in terms of business opportunity identification via the pre-sales activities of identifying direct and indirect business exchange partners. The firm level determinants are international knowledge in terms of general export knowledge (GEK) and EO. On the individual level prior knowledge in terms of general human capital in the form of education (EDUC), work experience (PRIORWORK), organizations worked for (ORGWORKEDFOR), industry experience (INDEXP), entrepreneur-specific human capital (EHC) and international experience of firm representatives were selected. Further, a representative’s experiential knowledge of the markets, targeted by the respective TMs, was assessed by their knowledge about the business (BK) and institutional environment (IK), and their work experience within the markets (TMCWORKEXP) prior to the TMs. The information processing preferences of the representatives, as being indicative of their preparedness to engage in the co-creation process for TM effectiveness is assessed through via the cognitive style dimensions knowing (KS), planning (PS) and creating style (CS). The TM effectiveness measures, i.e. identified business exchange partners, were divided into direct business partners, i.e. other businesses and clients, and indirect business partners, i.e. contacts to public figures and institutions. Of the two, only the outcome measure for the indirect business exchange partners provided the necessary basis for applying a multilevel approach for analysis. The performed regression analysis revealed that international knowledge of firms increased the TM effectiveness, but EO was not related. The individual level determinants added to the explained effectiveness in the form of an individual’s PS, but human capital determinants PRIORWORK and ORGWORKEDFOR decreased the effectiveness. The results further indicate that entrepreneurial firms and individuals are not more effective in making use of TMs despite their suggested superiority in engaging in the co-creation process of TM outcomes. Also, the adding of individual level determinants enhanced the prediction of TM effectiveness to a great extend proving their importance for future research on the matter of TMs and CD services demanding high participation in the service outcomes by clients. At the end of the study implications for practice, i.e. increasing TM effectiveness, and suggestions for future research are discussed.