Small Business

----

Research Summary

United States Small Business Administration 

RS Number 125 

May 1992 

----

State Export Promotion and Small Business

by Charles Cadwell 

National Small Business United, Washington,D.C. 

Completed under award no. SBA-5659-ADV-90

Purpose

The growing internationalization of the marketplace isincreasingly important to U.S. business and provides an importantarea of growth and expansion for many small firms. This studyexamines an important avenue of assistance for the small firmlooking to expand their markets abroad; state export promotionprograms. Every state government in the nation has an exportpromotion program and learning more about the important featuresof those programs can help federal policymakers assist the smallexporter, as well as increase the effectiveness of those programsfor small business.

Scope and Methodology

Nine case studies of export promotion programs were conductedto assess the common characteristics, assistance strategies, andrelative effectiveness for small business of the programs. Thestates were selected in consultation with the U.S. Small BusinessAdministration to reflect a mix of programs, state size, andexport activity. The study does not attempt to rank the exportpromotion success of the nine states.

In each of the states-California, Colorado, Illinois,Maryland, Michigan, Nebraska, New York, Rhode Island, andTexas-program officials and a small group of small businessowners were interviewed on the following topics:

- What goals do states have for small business export        programs, and how are these goals articulated? 
- What are the most effective ways of achieving these        goals? 
- How does the state assess whether they are succeeding? 

Highlights

State Goals 

States generally have ambitious and broad goals for exportpromotion. The goals set by legislatures tend to have multipleobjectives that leave decisions on allocating scarce resources toprogram managers. These legislative directions are also more inthe nature of licenses than mandates or limitations. Goals set byprogram managers tend to target levels of trade promotionactivity more than export sales results. 

According to Exporter magazine, only a small number of firms(about 3,600) export more than 250 shipments per year. Of the104,000 U.S. exporters, 78 percent export less than $250,000 peryear, averaging only six shipments per year with an average valueof $43,000. These "infrequent" exporters are also thesmaller firms. This stratification of export capability andactivity suggests dramatically different assistance needs amongexporters and potential exporters. State program goals tend notto take explicit account of this. Designing, marketing, andmeasuring assistance to the smallest exporter is a different taskfrom developing assistance for firms that have never exported atall or that export only to a narrow market. 

Most state program officials acknowledge that the ultimatemeasure of their success is export sales, but efforts tointroduce new firms to exporting or to reach the smallestexporters are not likely to be the shortest route to this goal. 

Beyond the stated goals, certain characteristics suggest goalsthat are implicit in the way states run their programs. Amongthese are an emphasis on existing exporters; state programs thatare provided free of charge, and states that depend on a networkof governmental and private entities for cooperation in marketingand delivering export assistance, particularly as they attempt toserve locations away from capital cities. It is less common,however, for these relationships to extend to formal contractingout. Instead, the state offices and local organizations willshare responsibilities for a broad package of services.

Successful Programs 

One-on-one counseling is seen as the most helpful program,although officials in several states acknowledge that it isbeyond their resource capability. Admittedly expensive, bothoverall and per firm, this assistance is provided without clearstandards for rationing this benefit. 

Export promotion was seen as an important state function and acost effective way of exposing large numbers of people to theidea of exporting. Conferences and seminars promote states'services, educate exporters, and sort out those individualsinterested in more intensive-and more expensive-counseling.

Measuring Results 

There is a widespread absence of measurement of outcomes;every state measured activity but no systematic review of theimpact of that activity occurred. It is impossible to relatestate export promotion activity to overall state exports or toexports by the firms that have been helped. Attempts to measureoutcomes have been loosely fashioned and aimed at producingpolitically useful indicators of satisfaction with the program.They do not usually focus on future efforts on particular typesof assistance or determining relative outcomes per state dollarexpended. One exception is an Urban Institute Report prepared forthe state of Illinois in 1989. A 1990 publication, *MonitoringEconomic Development Performance*, also by the UrbanInstitute, is an excellent starting point for states interestedin improvement in this area. 

Summary

The study makes the following recommendations: 

- State legislatures should establish explicit goals for        export promotion programs and should distinguish between        the goals of this export programs: 

Goals for programs aimed at increasing the number of smallbusiness exporters should be stated in terms of the number offirms, thereby focusing on the long-term export capability of abroader number of firms. 

Goals for programs aimed at increasing the dollar value ofexports should focus on existing but infrequent exports, therebyfocusing on shorter term results. 

- Program managers should understand the limitations of        export assistance and avoid overambitious promises of        dramatic economic effects from a state export assistance        effort. 
- Once states distinguish their promotion mission from        their assistance mandate, they should allocate resources        explicitly. 
- States should implement fees for services: 

Intensive counseling programs, such as Maryland's, should beprovided on a commission basis. 

Seminars and training should have modest participation fees. 

- States should articulate the comparative advantage of        various state-supported export assistance providers and        increase coordination and joint publicity about        resources. 
- The biannual National Association of State Development        Agency survey of states should be modified to ask states        to identify goals for which they actually measure        progress, how they measure that progress, and how the        information is used. 
- States should identify specific feedback mechanisms for        export promotion activity to evaluate the effectiveness        of specific programs. These mechanisms could include user        surveys; frequent budget reviews; and targets for        specific activities and staff, measured against results. 
- States should survey users both at the time of assistance        and after some time period-perhaps a year. 

User surveys should identify not only whether a service wasuseful, but how it was useful or why it was not. 

User surveys should ask specific facts, such as the number ofleads or number and value of sales, rather than projections aboutfuture sales or jobs-judgments the individual respondent may beunqualified to make on behalf of the firm.

For more information, contact Advocacy's Office of EconomicResearch at (202)205-6530.

Ordering Information

The complete report is available from: 

National Technical Information Service 

U.S. Department of Commerce 

5285 Port Royal Road 

Springfield, VA 22161 

(800)553-6847

Order Number: PB92-168657 

Cost: $26.00 (paper); $12.50 (Microfiche)