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Journal of International Business Studies (2008) 39, 304–325 & 2008 Academy of International Business All rights reserved 0047-2506 $30.00 www.jibs.net The role of past performance in export ventures: a short-term reactive approach Luis Filipe Lages1,2, Sandy D Jap3 and David A Griffith4 1 Faculdade de Economia, Universidade Nova de Lisboa, Portugal; 2Deshpande Center for Technological Innovation, MIT School of Engineering, USA; 3Goizueta Business School, Emory University, Atlanta, USA; 4Eli Broad Graduate School of Business, Michigan State University, East Lansing, USA Correspondence: Luis Filipe Lages, Marketing and International Business, Faculdade Economia, Universidade Nova de Lisboa, Lisboa 1099-032, Portugal. Tel: þ 351 21 3801601; Fax: þ 351 21 3886073; E-mail: [email protected] Abstract This paper employs organizational learning theory to examine the short-term effect of past export performance, and internal (management) and external (market) forces on marketing strategy adaptation and current export performance. Results from a survey of over 500 export managers indicate that current-period performance improvement (in terms of performance achievement, export intensity, and performance satisfaction in the current year) is influenced by the firm’s commitment to exporting. Further, the authors found that while performance satisfaction feeds performance improvement in the following year, both the previous year’s export intensity and export performance achievement produce a negative impact on current-period performance improvement. More importantly, the level of development in the export market facilitates marketing strategy adaptation in the short term, as does export intensity in the previous year. However, satisfaction with previousyear performance negatively influences the degree of distribution adaptation. Implications for international business researchers and practitioners are also discussed. Journal of International Business Studies (2008) 39, 304–325. doi:10.1057/palgrave.jibs.8400339 Keywords: past performance; short term; export performance; export marketing; organizational learning; adaptation-standardization Received: 4 November 2003 Revised: 19 January 2006 Accepted: 20 April 2007 Online publication date: 29 November 2007 INTRODUCTION As competition in world markets has intensified, researchers and practitioners have called for an increased understanding of the drivers of export performance (Cavusgil & Zou, 1994; Morgan, Kaleka, & Katsikeas, 2004), where export performance is defined as the extent to which a firm’s objectives, both strategic and financial, with respect to exporting a product to a market are achieved via the execution of the firm’s export marketing strategy (Cavusgil & Zou, 1994). While a significant amount of research has been conducted in the area of exporting, and the drivers of export performance, a review of the literature reveals several shortcomings that have limited our understanding of these issues. First, Morgan et al. (2004) note that although much research has been conducted on export activities, there are few strong theoretical frameworks for researching marketing aspects of export activity. Rather, they note that the majority of studies are descriptive, are largely atheoretic, or draw upon divergent theoretical perspectives, thus making it difficult to integrate findings from prior work. Given the lack of theory in this area, they argue that the field is at a standstill. Responding to this call, we adopt an organizational Role of past performance in export ventures Luis Filipe Lages et al 305 learning approach to better understand the theoretical aspects of managerial decisions driving export marketing strategy and export performance. Second, a synthesis of prior research on marketing strategy within the exporting literature suggests that the main purpose of marketing activity is learning about local environments and the development of capabilities that facilitate adaptation (Dickson, 1992). Given this focus, the majority of the marketing strategy export literature has focused on the issue of marketing strategy adaptation/ standardization. However, as Ryans, Griffith, and White (2003) conclude, with rare exception the majority of this research has been without a strong theoretical foundation. The introduction of organizational learning theory to the export marketing strategy literature provides a theoretical foundation for the seminal issue in the field of international marketing. Specifically, the organizational literature reveals the importance of learning about a firm’s environment as a basis to develop internal capabilities that facilitate adaptation (Dickson, 1992; Lord & Ranft, 2000; Özsomer & Gençtürk, 2003). Under this perspective, firms are theorized to develop core competencies that allow them to learn at least at the same baseline rate as that at which environments change (Stata, 1992). Therefore, building on prior international business literature (e.g., Luo & Peng, 1999; Sullivan & Nonaka, 1986), we adopt the organizational learning perspective of marketing strategy adaptation to consider how these strategies are formulated as a function of internal (management) and external (market) forces, thus informing our overall understanding of how marketing strategy is crafted in an exporting context. Thus we offer a more comprehensive, theoretically founded, understanding of the simultaneous links among the internal and external market forces of the firm, marketing strategy adaptation, and past and current export performance. Third, although the majority of the export literature undertakes a long-term perspective of performance, research suggests that managerial emphasis within Western firms is more specifically focused on maintaining short-term performance (Doyle, Saunders, & Wong, 1992; Lages & Lages, 2004; Madsen, 1998), a key aspect of strategy modification under an organizational learning perspective. We therefore focus on the determinants of shortterm performance as a means to understand the building blocks of long-term performance. Specifically, we investigate key determinants of short-term adaptation of marketing strategies and short-term performance using a 1-year period as a reference (cf. Cooper & Kleinschmidt, 1985; Lages & Lages, 2004; Lages, Lages, & Lages, 2005b). This approach helps to shed light on the initial managerial reactions and immediate adjustments to marketing mix strategy and their effects on annual performance, thus providing a short-term reactive approach to managerial action. Taken together, the shortcomings in the existing literature not only create theoretical and empirical gaps, but leave international business academics and practitioners without a clear understanding of the factors influencing export performance. As the underlying aspects of export marketing strategy are driven by managerial action, greater understanding of managerial learning from past performance can provide international business academics and practitioners with strategic insights into enhancing export performance (Lages, 2000). The purpose of this study is to contribute to the literature by addressing these issues within the context of exporters. THEORETICAL BACKGROUND Organizational Learning A large body of literature addresses the field of organizational learning (e.g., Crossan, Lane, & White 1999; Hult, Ketchen, & Nichols, 2002). Although many definitions and conceptualizations of organizational learning have been put forth in the literature (e.g., Levitt & March, 1988; March, 1991), consensus has not been reached (Fiol & Lyles, 1985; Tsang, 1997). However, as Lant, Milliken, and Batra (1992) argue, common themes to models of organizational learning exist. These include the following: (1) Managers are assumed to have set performance goals, which are compared with performance outcomes (Lant, 1992; Lant et al., 1992). (2) The discrepancy between goals and resultant performance acts as a signal of success or failure (Cyert & March, 1963; Lant, 1992; Lant et al., 1992; Levinthal & March, 1981). (3) Discrepancies between the managers’ goals and resultant performance influence managerial action and organizational change (Levitt & March, 1988; Lant & Mezias, 1992). Given the common themes identified by Lant et al. (1992), in this study we build upon the conceptualization of organizational learning developed by Levitt and March (1988), whose Journal of International Business Studies Role of past performance in export ventures Luis Filipe Lages et al 306 conceptualization incorporates these themes when defining organizational learning as the organizational encoding of inferences from past experiences into routines that guide behavior. While exploration learning capabilities are associated with longterm issues such as risk taking, radical innovation/ disinnovation, discovery and less certain returns, exploitation learning capabilities are associated with issues such as adaptation to the local market, refinement of current strategies, incremental innovation/disinnovation, and a higher probability of short-term efficiency. Since we are particularly interested in better understanding the short-term effects of past performance, we will focus primarily on exploitation learning capabilities. At a managerial level, managers attempt to understand the causal linkages between actions and organizational outcomes within the environment that the firm operates. Managerial reasoning then shapes managerial actions and firm-level outcomes (Lant et al., 1992; Luo & Peng, 1999). Therefore much of the research on organizational learning has focused on the interactive process of trial and error (e.g., Levinthal & March, 1981; Sullivan & Nonaka, 1986). Under this perspective, it has been argued that managers work to identify associations between firm-level behaviors that are associated with positive and negative outcomes, repeating those behaviors that drive positive outcomes and eliminating behaviors that result in negative outcomes (Cyert & March, 1963, Levinthal & March, 1981; Sullivan & Nonaka, 1986). Central to this stream of organizational learning has been organizational outcomes of firm performance and antecedents of prior firm performance and strategy. Alternatively stated, managers examine past performance in accordance with performance expectations. When performance has not met managerial expectations managers modify strategies, enhancing emphasis on those strategies that are believed to enhance performance and de-emphasizing those believed to decrease performance. Therefore a general model of organizational learning in this setting views the antecedents of export performance as derived from strategies that are the result of managerial decisions after an assessment of past performance, managerial forces and environmental forces (Ferrier, 2001; Lant et al., 1992; Luo & Peng, 1999; Prietula & Watson, 2000). Export Marketing Strategy Organizational learning theory argues that learning will occur when firms build on their strategies to Journal of International Business Studies extract knowledge from their local environment, thus learning to cope with local market conditions (Özsomer & Gençtürk, 2003; Sinkula, Baker, & Noordewier, 1997). Since exporting activity is considered to be an early stage of the internationalization process, exporting firms are viewed as engaging in low-risk exploitation-type learning (Özsomer & Gençtürk, 2003). Exploitation-type strategies are typically associated with issues such as adaptation to the local market, refinement of current strategies, and a higher probability of short-term efficiency (cf. March, 1991). Hence, we draw on the exploitation side of the organizational learning literature to understand export marketing strategy implementation. Export marketing strategy is the means by which a firm responds to the interplay of internal and external forces to meet the objectives of the export venture involving aspects of the conventional marketing plan (i.e., product, price, promotion, and distribution) (Cavusgil & Zou, 1994). Therefore, the exploitative side of organizational learning is aligned with the prevailing opinion in the export marketing strategy literature that marketing strategies incorporate differences in the politico-legal, economic, and sociocultural characteristics of any host country (Cavusgil & Zou, 1994; Lee & Griffith, 2004). Specifically, the key issue within the export strategy literature has been the determination of the degree to which export marketing strategy elements (i.e., product, price, promotion, and distribution) are adapted, and of the internal and external forces that influence these adaptations (Buzzell, 1968; Cavusgil & Zou, 1994; Douglas & Craig, 1989; Ryans et al., 2003; Samiee & Roth, 1992). Export Performance Export performance, both past and present, plays a critical role in organizational learning. Whereas past export performance motivates managerial strategy actions, current export performance not only signals the effectiveness of the strategy modifications made by managers, but also sets forth new strategy actions. Export performance is defined as the extent to which a firm’s objectives, both strategic and financial, with respect to exporting a product to a market, are achieved via the execution of the firm’s export marketing strategy (Cavusgil & Zou, 1994). In the export marketing literature, researchers have used a wide array of measures for performance (Diamantopoulos & Winklhofer, 2001; Katsikeas, Leonidou, & Morgan, 2000). Broadly Role of past performance in export ventures Luis Filipe Lages et al 307 speaking, the literature considers both objective (financial) and subjective (non-financial) measures of export performance (Zou & Stan, 1998); we employ a similar approach in this research. Specifically, we consider three dimensions of export performance: export intensity (i.e., the proportion of production output to exports evidenced by the percentage of exports to the firm’s total sales and profits); export achievement (i.e., the extent to which firms achieve their export objectives in terms of sales, profitability, and market share, as well as overall performance); and export satisfaction (i.e., a compound psychological variable (an affective state) assessing the effectiveness of a marketing program in terms of its sales, profitability, and market share, as well as its overall performance). HYPOTHESIS DEVELOPMENT Figure 1 presents a conceptual model of the short-term reactive approach to export marketing performance under an organizational learning perspective. This MANAGEMENT FORCES •Firm’s commitment to exporting •Management international experience model incorporates financial and non-financial measures of past performance, as well as managerial and environmental forces as antecedents of export marketing strategy and financial and non-financial export performance. In line with most recent research (e.g., Morgan et al., 2004; Lages, Lages, & Lages, 2005a, b), the unit of analysis throughout the discussion is an individual product–market export venture of the firm, involving a specific product in a specific export market. Export Marketing Strategy Export marketing strategy is the means by which a firm responds to the interplay of internal and external forces to meet the objectives of the export venture involving all aspects of the conventional marketing plan (i.e., product, price, promotion, and distribution) (Cavusgil & Zou, 1994). Researchers argue that by adapting a firm’s marketing strategy to market-specific characteristics a firm can delivery greater value in the local market by meeting local market needs, thereby improving its export performance (e.g., Cavusgil & Zou, 1994; Koh, 1991; Shoham, 1999). These arguments are h3 (+) h5 (+) h2 ) (+ h4 ) (+ EXPORT PERFORMANCE IN PRECEDING YEAR •Export intensity •Performance achievement •Performance satisfaction CURRENT YEAR ADAPTATION OF MARKETING MIX •Product adaptation •Promotion adaptation •Pricing adaptation •Distribution adaptation h8 (-) h9 h1 (+) EXPORT PERFORMANCE IMPROVEMENT IN CURRENT YEAR •Export intensity •Performance achievement •Performance satisfaction (+ h6 (+ ) h7 (+ ) ) EXPORT MARKET FORCES •Export market development •Export market competition Figure 1 ? (+/-) Conceptual framework. Journal of International Business Studies Role of past performance in export ventures Luis Filipe Lages et al 308 supported by numerous empirical studies that have found a positive relationship between product adaptation and export performance within the United States (e.g., Cavusgil & Zou, 1994; Koh, 1991; Shoham, 1999; Zou, Andrus, & Norvell, 1997). Similar findings have been found related to promotion adaptation (e.g., Seifert & Ford, 1989; Shoham, 1996, 1999), pricing adaptation (e.g., Das, 1994; Koh, 1991; Leonidou, Katsikeas, & Samiee, 2002) and distribution adaptation (e.g., Koh, 1991; Shoham, 1996). However, this is not to suggest that the literature examining the relationship of international marketing strategy to performance is consistent (see Katsikeas, Samiee, & Theodosiou, 2006). Rather, some research has found that standardization of marketing strategy elements can enhance export performance. For example, Lages and Montgomery (2001, 2005) found that standardization of price improves export performance. However, findings contrary to adaptation may be due to inappropriate adaptation efforts. For example, Cavusgil and Zou (1994) note that a negative adaptation effect can occur if the adapted marketing strategies are inappropriate (e.g., when an adaptation eliminates the universal appeal of the product, or if the adaptation is costly). As the fundamental element of value delivery entails satisfying customers’ needs and desires, adaptation (which accommodates local competitive practices, customs, traditions, religions, levels of education, ways of living, communication infrastructures, and government restrictions), of at least some degree, is theoretically justifiable and suggestive of a positive effect. Hence, we theorize that performance improvement in the current year is positively associated with the exporter’s adaptation of marketing strategy elements. This finding leads to the following hypothesis: Hypothesis 1: Current-year export performance is positively influenced by: (a) (b) (c) (d) product adaptation promotion adaptation pricing adaptation distribution adaptation. strategies that are the result of managerial decisions influenced by managerial forces (Ferrier, 2001; Lant et al., 1992; Luo & Peng, 1999; Prietula & Watson, 2000). Specifically within the context of export marketing strategy, Cavusgil and Zou (1994) argue that marketing strategy adaptation decisions are influenced by management forces, such as a firm’s international experience and its extent of international business involvement. We therefore examine the firm’s commitment to exporting and management’s degree of international experience as drivers of marketing strategy adaptation and current-year export performance. The influence of commitment to exporting on export marketing strategy and current-year performance. The firm’s commitment to exporting refers to the degree to which organizational and managerial resources are allocated to an export venture. As increasing levels of resources are committed to the export venture, the venture is able to improve its planning procedures and implement more adaptive strategies, as adaptations require greater resources. When the firm demonstrates a strong commitment to exporting, managers are motivated to work harder on demanding tasks such as strategy adaptation. Without appropriate resources committed to the export venture the firm is unable to engage in the necessary adaptations of the firm’s marketing strategy in order to meet local market needs. The firm’s commitment to an export venture should also directly influence the performance of the export venture, as the firm’s commitment will direct greater resources to the task, better enabling the venture to achieve its exporting goals (Aaby & Slater, 1989; Bilkey, 1978; Diamantopoulos & Inglis, 1988; Shoham, 1999; Tookey, 1964; Zou & Stan, 1998). For example, the firm’s commitment to a particular direction may also enhance employees’ feelings of loyalty and duty to the organization, as well as increase clarity in the prioritization of tasks (Wiener & Vardi, 1980). We therefore hypothesize: Hypothesis 2: A firm’s commitment to exporting positively influences: Internal (Management) Forces As discussed previously, a general model of organizational learning in this setting views the antecedents of export performance as derived from Journal of International Business Studies (a) (b) (c) (d) product adaptation promotion adaptation pricing adaptation distribution adaptation. Role of past performance in export ventures Luis Filipe Lages et al 309 Hypothesis 3: A firm’s export performance in the current year is positively influenced by a firm’s commitment to exporting. The influence of international experience on export marketing strategy and current-year performance. Management’s international experience refers to the degree to which the firm’s management has overseas experience, having lived or worked abroad, as well as the accumulated skills and abilities that support the achievement of the organization’s exporting objectives and goals (Cavusgil, Zou, & Naidu, 1993; Das, 1994). Experience is a primary source of organizational learning (Penrose, 1959). Experience in a wide range of markets provides managers with a variety of insights, leading to a more extensive knowledge base (March, 1991). Once a firm has international experience, managers will better learn the specific contingencies of each export market, and the complex issues of marketing adaptation to the different markets will be easier to implement (Cavusgil et al., 1993; Douglas & Craig, 1989; Levinthal & March, 1993; Seifert & Ford, 1989; Sinkula, 1994). Further, as management’s experience in international markets increases, the firm is better able to achieve its exporting goals because international experience promotes exploitative learning by helping the firm to identify and take advantage of exporting opportunities while avoiding international threats (Özsomer & Gençtürk, 2003; Zou & Stan 1998). Madsen (1989) contends that international experience leads to a better understanding of market mechanisms and a network of personal contacts, resulting in improved marketing decisions, and ultimately better performance. Therefore we theorize: performance as derived from strategies that are the result of managerial decisions influenced by market forces (Ferrier, 2001; Luo & Peng, 1999; Prietula & Watson, 2000). A firm’s ability to adapt quickly is associated with its ability to learn from market opportunities and environmental changes (Özsomer & Gençtürk, 2003; Ulrich, Von Glinow, & Jick, 1993). Export market development and export market competition determine demand potential in a foreign market (Theodosiou & Leonidou, 2003) and affect the firm’s marketing strategy. The influence of export market development on export marketing strategy. Export market development refers to the overall standard of living in the export market, as evidenced by the level of economic development and education levels in that market. As the level of development in an export market increases, firms adapt their marketing strategies. The rationale for strategy adaptation is derived from multiple factors. First, more developed countries have more developed regulatory environments, often necessitating product modifications to local standards (Cavusgil & Zou, 1994). Second, more educated and sophisticated consumers are less willing to accept products that do not specifically fit their needs and/or consumption patterns. Third, exploitation learning flourishes in more stable and predictable environments, characteristic of more developed markets, allowing managers to adapt marketing strategies more effectively (Jaworski & Kohli, 1993). Export ventures in more developed markets are therefore in a better position to build on existing routines and follow a strategy refinement approach of the firm’s existing strategy to the foreign market (Duncan, 1974).1 Hence, we theorize: Hypothesis 4: A firm’s international experience positively influences: Hypothesis 6: Export market development positively influences: (a) (b) (c) (d) (a) (b) (c) (d) product adaptation promotion adaptation pricing adaptation distribution adaptation. Hypothesis 5: A firm’s export performance in the current year is positively influenced by a firm’s international experience. External Market Forces A general model of organizational learning in this setting views the antecedents of export product adaptation promotion adaptation pricing adaptation distribution adaptation. The influence of export market competition on export marketing strategy. Export market competition relates to the extent to which businesses vie for the economic rents of an industry. Competition may vary along multiple dimensions, such as the number of competitors, price competitiveness, and Journal of International Business Studies Role of past performance in export ventures Luis Filipe Lages et al 310 service/delivery. Research indicates that as the level of competition in the export market increases, firms engage in marketing strategy adaptation to differentiate their offerings from others in the market and maximize value delivery (Cavusgil & Zou, 1994; Cavusgil et al., 1993). Without differentiation, a firm cannot gain an advantage over its competitors to produce higher rents. Hence we theorize: Hypothesis 7: Export market competition positively influences: (a) (b) (c) (d) product adaptation promotion adaptation pricing adaptation distribution adaptation. Past Export Performance As discussed previously, a general model of organizational learning in this setting views the antecedents of current export performance as derived from strategies that are the result of managerial strategy decisions, such as marketing strategy adaptation. However, both strategy decisions and current-year performance, under an organizational learning perspective, can be viewed as driven by managerial assessment of past performance. The influence of past export performance on marketing strategy adaptation. Under an organizational learning perspective, managers are viewed as assessing past performance in accordance with specified goals and then determining necessary actions to be taken. Hence, managers can be viewed as reactive to past performance in the determination of current strategies. Empirical research in organizational learning demonstrates that past performance influences current managerial decisions (Lant & Hurley, 1999; Lant et al., 1992; Lant & Montgomery, 1987). These findings are consistent with a central assumption of the organizational learning literature, which argues that organizations and individuals set goals and adjust their behavior in response to favorable and unfavorable feedback (Cyert & March, 1963; March & Simon, 1958). For example, Greve (1998) reveals that if performance increases, adaptive behavior declines. This decline occurs because organizations exhibit political resistance to change, and managers face uncertainty regarding the opportunities that exist in the environment (Hannan & Journal of International Business Studies Freeman, 1977). In a similar manner, it can be theorized that a firm may be more likely to take a standardized approach to its marketing strategy in an export venture when its past export performance has been particularly strong (Lages & Montgomery, 2004). In contrast, when an export venture is not performing well, managers do not have the privilege of maintaining the status quo. Hence, we theorize that the firm will rely less on standardized strategies in favor of adaptive strategies. More formally: Hypothesis 8: A firm’s export performance in the preceding year is negatively related to the firm’s: (a) (b) (c) (d) product adaptation promotion adaptation pricing adaptation distribution adaptation. The influence of past export performance on currentyear export performance. Organizational learning theory also argues that past actions have a cumulative effect on current actions and outcomes. For example, past performance plays a major role in the context in which current marketing strategy decisions are taken (Lages & Jap, 2003). These prior decisions also influence future performance, which forms the basis for future decisions. The reinforcing effect of this feedback loop is related to the phenomenon of path dependence, where success in the past produces a tendency toward similar behavior in the future (Cyert & March, 1963; Helfat, 1994; Nelson & Winter, 1982). As part of this discourse we theorize that past export performance sets the stage for current export marketing decisions and also for current export performance (as the current strategies incorporate prior strategy adjustments based upon learning). Thus we hypothesize that: Hypothesis 9: A firm’s export performance in the preceding year is positively related to export performance in the current year. METHODOLOGY To examine the hypotheses we focused on the main export venture of exporters from Portugal. We selected this setting for three specific reasons. First, our focus on a firm’s main export venture derived primarily from exploratory interviews that Role of past performance in export ventures Luis Filipe Lages et al 311 indicated that Portuguese exporters typically developed a marketing strategy only for their main export venture. Further, the focus on a single export venture allowed us to associate marketing strategy more precisely with its antecedents and outcomes, as the main export venture involved a single product or product line exported to a single foreign market. Second, Portugal was selected because of the small size of the domestic market, which puts pressures on domestic firms to become internationally oriented (Sousa & Bradley, 2006). Third, Portugal is an interesting context owing to the importance of exporting in the country and its membership of the European Union (EU). The EU is the world’s largest exporter of goods, maintaining a stable share of approximately one fifth of total world exports (intra-EU trade excluded) since 1990 (European Commission, 2000). As in many countries in the EU, economic growth in Portugal depends heavily on the exporting success of its firms. Since entering the EU in 1986, the country’s export growth has boomed. In fact, exporting is viewed as an important means for quickly decreasing the nation’s budget deficit (Financial Times, 2002). Sample Collectively, these characteristics indicate that both Portuguese firms and the national government are motivated to develop successful export marketing strategies in the short term, an ideal context for considering the activities of export marketing performance and strategy definition. Data used to test the model were collected through a self-administered questionnaire sent to exporters in Portugal. A sample of 2500 firms was randomly generated from a government agency database of ICEP-Portugal. Pre-test. Pre-testing was conducted of three stages. The first stage consisted of refining the English version of the survey instrument and cover letter. The initial survey format was developed based upon pre-existing measures developed for and used within the United States (see Measures section and Appendix). Next, the survey instrument was translated and back-translated. In order to avoid translation errors, a different researcher translated the questionnaire into English. During this stage the content and face validity of the items were assessed by four Portuguese judges (university lecturers in marketing); each judge was asked to assess how representative each item was of the final construct. The survey was revised according to their comments. Finally, the revised instrument was then pre-tested with a sample of 15 managers involved in export operations. Pre-test results were used to refine the questionnaire further. Data collection. Individuals identified in the source directory were contacted via mail and asked to have the person most involved with the daily administration of the exporting relationship complete the survey. In the first mailing, a cover letter, a questionnaire, and an international postage-paid business reply envelope were sent to the person responsible for exporting in each of the 2500 Portuguese firms. A follow-up survey packet was sent after a 4-week interval. To enhance the response rate, respondents were offered a list of potential overseas importers or clients in return for a completed survey. Of the 2500 surveys mailed, 29 were returned indicating that they no longer exported, and 119 questionnaires were returned by the postal service as undeliverable. These firms had either closed down or had moved without leaving a forwarding address. Thus the sample size was reduced to 2352. Of these, 519 usable questionnaires were returned, a 22% response rate. The Portuguese exporting industry consists primarily of small to mid-sized firms. Exporters from all the Portuguese regions participated in the survey. The average annual sales of these firms ranged from h1.5 million to h5 million, with 27% of the firms having sales below h1.5 million, 31% from h5 million to h35 million, and 8% of the companies having annual sales over h35 million. With regard to the number of employees, 19% had fewer than 20 employees, 27% had between 20 and 49, 22% between 50 and 99, 27% between 100 to 500, and 5% had more than 500 employees. Over 75% of the respondents reported on ventures with other European countries, while the remainder occurred with the United States and other nonEuropean countries. The average sales volume of the main export venture ranged from h400,000 to h1.5 million. The vast majority of firms had significant experience in international business: 22% had 2–7 years, 39% had 8–15 years, 26% had 16–30 years, and 13% had over 30 years. Respondents held positions such as president, marketing director, managing director, and exporting director. Thirty-nine percent of the respondents indicated that they had been responsible for the exporting operations of their firm for 8–15 years, Journal of International Business Studies Role of past performance in export ventures Luis Filipe Lages et al 312 while 81% of the respondents ranged from 3 to 30 years of responsibility for the operations. Respondents were also asked to indicate their degree of experience in exporting, on a scale where 1¼none and 5¼substantial. The mean response was 3.6 (s.d.¼0.84, range 1–5). Collectively, this indicates that although the title of the respondents’ positions may be wide ranging, the individuals appear to have significant knowledge in the specific exporting activities of the firm, and are experienced with exporting in general. Non-response bias was tested by assessing the differences between the early and late respondents with regard to the means of all the variables (Armstrong & Overton, 1977). Early respondents were defined as the first 75% of the returned questionnaires, and the last 25% were considered to be late respondents. These proportions approximate the actual way the questionnaires were returned. No significant differences among the early and late respondents were found, suggesting that response bias was not a significant problem in the study. Measures. Table 1 provides an overview of the construct means, standard deviations, and correlation matrix among the 14 constructs. Export performance is conceptualized as the extent to which a firm’s objectives, both strategic and financial, with respect to exporting a product to a market are achieved via the execution of the firm’s export marketing strategy (Cavusgil & Zou, 1994). The export literature considers both objective (financial) and subjective (non-financial) measures of export performance (Zou & Stan, 1998). We therefore consider three dimensions of export performance: export intensity, export achievement, and export satisfaction. All three dimensions were measured for both the preceding year and the current year. Export intensity refers to the proportion of production output to exports, as evidenced by the percentage of exports to the firm’s total sales and profits. This variable is one of the most widely used measures of performance in the literature on international marketing (Katsikeas et al., 2000). Although objective assessments of actual performance may be regarded as trustworthy, this type of approach can also raise various measurement problems. We therefore also consider two forms of subjective measure: performance achievement and satisfaction with performance. The measure of export intensity consisted of a three-item scale adapted Journal of International Business Studies from Kaynak and Kuan (1993) (apreceding¼0.96; acurrent¼0.96). Management’s expectations and perception of the achievement of exporting goals play a key role in the definition of firms’ export activities. Performance achievement refers to the extent to which firms achieve their export objectives in terms of sales, profitability, and market share, as well as overall performance (cf. Katsikeas, Piercy, & Ioannidis, 1996). Export performance achievement was measured via a five-item scale adapted from Katsikeas et al. (1996) (apreceding¼0.92; acurrent¼0.95). Finally, performance satisfaction is defined as a compound psychological variable (an affective state) assessing the effectiveness of a marketing program in terms of its sales, profitability, and market share, as well as its overall performance (cf. Bonoma & Clark, 1988). Satisfaction with export performance was measured via a five-item scale adapted from Shoham (1998) (apreceding¼0.94; acurrent¼0.97). By measuring performance achievement and satisfaction with performance, instead of performance per se, we were able to capture the degree to which performance matched the goals and aspiration levels of the firm, and compare it across a variety of exporting firms. In this manner, a boundary was incorporated from the perspective of the firm and used as a reference point for perceived success and failure under a learning orientation perspective. Export marketing strategy was assessed along the elements of product, promotion, price, and distribution. Product adaptation was measured via a four-item scale adapted from Zou et al. (1997) (a¼0.81). Promotion adaptation was measured via a five-item scale adapted from Zou et al. (1997) (a¼0.89). Price adaptation was measured via a four-item scale adapted from Shoham (1999) (a¼0.85). Distribution adaptation was measured by a four-item scale adapted from Shoham (1999) (a¼0.87). Measures for firm’s commitment to the export venture (a¼0.81), management’s international experience (a¼0.75), export market development (a¼0.77), and export market competition (a¼0.79) were also developed for this study, based upon existing conceptualizations and items (e.g., Cavusgil & Zou, 1994). Further, to minimize spuriousness of results, a number of covariates were included in the analysis. Specifically, size of the firm, distance of export market from home country, number of export markets and export sales volume were included. Table 1 Means, standard deviations, and correlations among constructs Construct s.d. Min Max 1 2.2 0.88 1.0 5.0 1 2.5 0.81 1.0 5.0 0.22 1 2.8 0.93 1.0 5.0 0.35 0.37 1 3.1 0.97 1.0 5.0 0.14 0.41 0.44 1 3.3 0.87 1.0 5.0 0.17 0.08 0.02 0.09 1 3.0 0.74 1.0 5.0 0.01 0.07 0.06 0.09 0.39 1 3.7 0.87 1.0 5.0 0.14 0.11 0.02 0.14 0.30 0.14 1 3.8 0.73 1.0 5.0 0.06 0.01 0.04 0.22 0.14 0.25 1 3.3 1.02 1.0 5.0 0.03 0.02 0.02 0.00 0.14 0.09 0.05 0.06 1 3.3 0.89 1.0 5.0 0.10 0.08 0.08 0.04 0.14 0.15 0.04 0.07 0.74 1 3.1 0.92 1.0 5.0 0.08 0.02 0.10 0.05 0.13 0.14 0.02 0.00 0.72 0.86 2.7 1.31 1.0 5.0 0.18 0.05 0.01 0.02 0.54 0.25 0.20 0.20 0.00 0.02 0.02 3.2 0.76 1.0 5.0 0.01 0.08 0.07 0.00 0.34 0.27 0.14 0.04 0.01 0.15 0.09 0.35 1 2.8 0.75 1.0 5.0 0.00 0.02 0.07 0.05 0.27 0.24 0.16 0.02 0.04 0.15 0.20 0.29 0.77 1 2.6 0.98 1.0 5.0 0.04 0.18 0.19 0.25 0.04 0.06 0.06 0.06 0.03 0.14 0.18 0.13 3.6 2608 3.6 1.37 2305 1.66 1.0 502 1.0 0.06 0.07 0.08 0.08 0.03 0.43 0.16 0.01 0.37 0.00 0.07 0.10 0.02 0.04 0.15 0.11 0.00 4 0.10 5 6 7 8 9 0.10 0.07 0.13 0.16 0.11 0.06 0.17 0.16 0.17 10 11 12 13 14 15 16 17 18 1 1 0.12 0.09 0.01 0.09 0.04 0.01 0.02 0.12 0.03 0.04 0.20 0.16 0.39 0.39 0.31 1 0.32 0.09 0.44 1 0.11 1 0.52 0.12 1 313 All correlations p0.09 or X0.09 are significant at a¼0.05. 3 Luis Filipe Lages et al 6.0 0.07 11286 0.01 8.0 0.04 2 Role of past performance in export ventures Journal of International Business Studies 1. Product adaptation 2. Promotion adaptation 3. Pricing adaptation 4. Distribution adaptation 5. Firm’s commitment to exporting 6. Management international experience 7. Export market development 8. Export market competition 9. Export intensity improvement in current period 10. Performance achievement improvement in current period 11. Satisfaction with performance improvement in current period 12. Export intensity in preceding year 13. Performance achievement in preceding year 14. Satisfaction with preceding year’s performance 15. Number of countries 16. Size 17. Distance 18. Export sales value Mean Role of past performance in export ventures Luis Filipe Lages et al 314 ANALYSIS Larcker (1981) test; all possible pairs of constructs passed this test. Evidence of discriminant validity was revealed by the fact that the shared variance among any two constructs (i.e., the square of their intercorrelation) was less than the average variance explained in the items by the construct (Fornell & Larcker, 1981; MacKenzie, Podsakoff, & Rich, 2001). Confirmatory Factor Analysis In order to assess the validity of the measures, the items were subjected to a confirmatory factor analysis, using full-information maximum likelihood (FIML) estimation procedures in LISREL 8.3 (Jöreskog & Sörbom, 1993). In this model, each item was restricted to load on its pre-specified factor, with the 14 first-order factors allowed to correlate freely. The chi-square for this model was significant (w2¼3975.79, 1393 d.f., po0.00). Since the chi-square statistic is sensitive to sample size, we also assessed additional fit indices: the comparative fit index (CFI), the incremental fit index (IFI), and the Tucker–Lewis Fit Index (TLI). The CFI, IFI, and TLI of this model are 0.90, 0.90, and 0.89, respectively. The RMSEA was 0.061. As shown in the Appendix, all constructs present the desirable levels of composite reliability (cf. Bagozzi, 1980). Convergent validity was evidenced by the large and significant standardized loadings of each item on its intended construct (average loading size was 0.81). Discriminant validity among the constructs was assessed using the Fornell and Structural Model Estimation The hypotheses were tested using FIML estimation procedures in LISREL 8.3. The estimation results for the significant structural paths are exhibited in Figure 2. The results of the structural equation model testing indicate an acceptable fit (w2¼4356.82, d.f.¼1577, po0.00, CFI¼0.90, IFI¼0.90, TLI¼0.89, RMSEA¼0.058). Significance of the parameter estimates was assessed using t-values. Hypothesis 1 indicated that current-year export performance would be positively influenced by (a) product adaptation, (b) promotion adaptation, (c) pricing adaptation, and (d) distribution adaptation. The hypothesis was examined employing three measures of export performance (intensity, achievement and satisfaction). In all, only one of the relationships was significant (i.e., product adaptation γ71 = 0.17 Management forces γ61 = 0.16 γ51 = 0.20 Firm’s commitment to exporting ξ1 γ1 = 1 0.1 Current year adaptation of marketing mix 4 Management international experience ξ2 γ56 = -0.26 γ76 = -0.32 γ57 = 0.19 4 0. 14 = γ 13 1 0. Pricing adaptation η3 = γ67= 0.16 γ77 = 0.40 γ4 = 7 -0.2 0 Export performance improvement in current year Export intensity η5 Performance achievement η6 γ Performance satisfaction ξ7 Promotion adaptation η2 23 Performance achievement ξ6 γ 15 = 0.20 γ65 = -0 .18 γ55 = -0.12 γ75 = -0 .18 11 Export intensity ξ5 -0. Export performance in preceding year Product adaptation η1 Performance satisfaction η7 Export market forces Export market competition ξ4 Distribution adaptation η4 5 γ43 = 0.18 Number of markets Size Distance 0.0 6 0.1 Export market development ξ3 5 0.0 Export sales value 0.09 0.11 0.10 Figure 2 Summary of significant relationships. For simplicity of depiction we do not include non-significant relationships, observable indicators, factor loadings, measurement and latent errors, inter-factor correlations, or t-values. Journal of International Business Studies Role of past performance in export ventures Luis Filipe Lages et al 315 has a significant negative effect on performance achievement; b61¼0.11, po0.05). Hence we did not find support for H1a–H1d.2 Hypothesis 2 indicated that a firm’s commitment to exporting would positively influence (a) product adaptation, (b) promotion adaptation, (c) pricing adaptation, and (d) distribution adaptation. Supportive of H2a, the firm’s commitment to exporting has a significant, positive effect on product adaptation (g11¼0.14, po0.05). Support was not found for H2b (g21¼0.02, n.s.), H2c (g31¼0.01, n.s.), or H2d (g41¼0.06, n.s.).3 Hypothesis 3 argued that a firm’s export marketing performance in the current year would be positively influenced by the firm’s commitment to exporting. The hypothesis was examined employing three measures of export performance (intensity, achievement, and satisfaction). Firm commitment to exporting significantly influenced export intensity (g51¼0.20, po0.01), performance achievement in the current period (g61¼0.16, po0.01), and performance satisfaction (g71¼0.17, po0.01).4 Thus H3 was fully supported. Hypothesis 4 indicated that a firm’s international experience would positively influence (a) product adaptation, (b) promotion adaptation, (c) pricing adaptation, and (d) distribution adaptation. Management’s international experience was not significantly related to product (g12¼0.11, n.s.), promotion (g22¼0.02, n.s.), pricing (g32¼0.07, n.s.), or distribution adaptation (g42¼0.08, n.s.). Thus H4a–H4d are not supported.5 Hypothesis 5 indicated that a firm’s export performance in the current year would be positively influenced by the firm’s international experience. The results indicate that management’s international experience is not significantly related to export intensity (g52¼0.02, n.s.), performance achievement in the current period (g62¼0.04, n.s.), or performance satisfaction (g72¼0.06, n.s.). Thus H5 is not supported.6 Hypothesis 6 indicated that a firm’s international experience would positively influence (a) product adaptation, (b) promotion adaptation, (c) pricing adaptation, and (d) distribution adaptation. The results indicate that export market development was positively related to product (H6a: g13¼0.14, po0.05), promotion (H6b: g23¼0.14, po0.05), and distribution (H6d: g43¼0.18, po0.01) adaptation, but is not significantly related to pricing adaptation (H6c: g33¼0.00, n.s.). Thus the results provide support for H6a, H6b and H6d.7,8 Hypothesis 7 indicated that export market competition would positively influence (a) product adaptation, (b) promotion adaptation, (c) pricing adaptation, and (d) distribution adaptation. Export market competition has no significant effects on product (g14¼0.04, n.s.), promotion (g24¼0.08, n.s.), pricing (g34¼0.01, n.s.), or distribution adaptation (g44¼0.02, n.s.). Thus no support was found for H7a–H7d.9 Hypothesis 8 indicated that a firm’s export performance in the preceding year would negatively relate to the firm’s (a) product adaptation, (b) promotion adaptation, (c) pricing adaptation, and (d) distribution adaptation. The results indicate that prior period export intensity exerts a positive significant effect on product adaptation (g15¼0.20, po0.01), but has no significant effect on promotion (g25¼0.00, n.s.), pricing (g35¼0.01, n.s.), or distribution (g45¼0.02, n.s.) adaptation. Prior period performance achievement has a marginally significant, positive effect on promotion adaptation (g26¼0.13, po0.10), but non-significant effects on product (g16¼0.05, n.s.), pricing (g36¼0.09, n.s.), and distribution (g46¼0.09, n.s.) adaptation. Prior period performance satisfaction produces a significant negative effect on distribution adaptation (g47¼0.20, po0.05), and a marginally significant effect on promotion adaptation (g27¼0.13, po0.10), but does not have a significant effect on product (g17¼0.05, n.s.) or pricing (g37¼0.03, n.s.) adaptation. Thus there is partial support for H8a–H8d. Hypothesis 9 indicated that a firm’s export performance in the preceding year is positively related to export performance in the current year. The results indicate that there is a significant negative effect of prior-period export intensity on current-period export intensity (g55¼0.12, po0.05), performance achievement (g65¼0.18, po0.01), and performance satisfaction (g75¼0.18, po0.01). Prior-period performance achievement has significant negative effects on export intensity (g56¼0.26, po0.01) and performance satisfaction (g76¼0.32, po0.01), but not on current performance achievement (g66 ¼0.08, n.s.). Prior-period performance satisfaction has significant positive effects on export intensity (g57¼0.19, po0.01), performance achievement (g67 ¼0.16, po0.05), and performance satisfaction (g77 ¼0.40, po0.01). Thus there is partial support for H9. DISCUSSION This study was motivated by a desire to gain a better understanding of managerial learning from past performance in the enactment of marketing Journal of International Business Studies Role of past performance in export ventures Luis Filipe Lages et al 316 strategy and implications for export performance. We employed an organizational learning perspective, within a short-term reactive approach, to understand how internal, external, and past performance influenced marketing strategy and current-year performance. Our findings offer insights into these issues and provide significant implications for international marketing academics and practitioners. Theoretical Implications In this study we adopted the organizational learning perspective to consider current export performance as a foundation of export marketing strategies, preceding-year export performance, internal (management) and external (market) forces. The central element of the study was the short-term impact of past export performance on export marketing strategy and current-year export performance. Surprisingly, the results suggest that in the short term the preceding year’s export performance has little influence on current-year marketing strategy adaptation, and that current-year marketing strategy adaptation has little influence on current-period performance improvement. In fact, the only significant relationships identified between preceding-year export performance, marketing strategy adaptation, and current-period performance improvement were related to product adaptation (i.e., preceding-year export intensity positively influences product adaptation, and product adaptation negatively influences current-year export performance achievement) and distribution adaptation (i.e., preceding-year export performance satisfaction is negatively related to distribution adaptation). One rationale for the significant findings is that product standardization might improve performance, particularly if it enables the alleviation of gray markets or economies of scale in marketing efforts. Another possible explanation might be based on the fact that managers use mental models to interpret reality. It might be possible that the assumptions about the market that led to actions are not completely accurate (Day, 1994; Day & Nedungadi, 1994; Senge 1990, 1992). For example, if a firms does a market study that determines that it is important to adapt to the foreign market brand name, product design, product labeling and variety of the main exporting product line, and managers have flawed models that lead them to act on the assumption that brand name is the key criterion, ‘‘then misinterpretation of the information is likely to lead to flawed learning and thus flawed Journal of International Business Studies organizational actions’’ (Sinkula et al., 1997: 308). In these situations it is better to standardize the domestic strategy to the foreign market rather than adapt wrongly (Cavusgil & Zou, 1994). Further, in terms of distribution adaptation, the results are supportive of organizational learning, which would imply that lower satisfaction with performance would require adjustments in strategy. For example, Greve (1998) argues that when performance increases, adaptive behavior declines, because organizations exhibit political resistance to change, and managers face uncertainty regarding existing opportunities (Hannan & Freeman, 1977). However, the general lack of a higher number of short-term effects related to the performance– strategy–performance relationship should not be viewed as disconfirmation of organizational learning theory, but rather within the context of organizational learning theory. Specifically, according to organizational learning theory, learning may affect strategy definition without affecting shortterm performance. For example, Sinkula et al. (1997: 307) argue: ‘‘In the short run, measures of market performance may mask real improvements in the learning capabilities of an organization [because] before market performance changes can be expected, absolute thresholds of improvement must be surpassed.’’ Therefore the general lack of findings in this study related to the influence of preceding-year export performance on export marketing strategy may be due to the short-term focus, as it may take longer than the current year to observe the impact of adapting marketing strategies on export performance. Furthermore, the lack of findings may result from differences in product types. In fact, the extant adaptation/standardization literature suggests that type of product may significantly influence marketing strategy adaptations. Post hoc analysis conducted along product type supports this conclusion, providing further insights into the hypotheses (see notes 2–8), thus suggesting the complex relationships that can be uncovered via the employment of organizational learning theory. The results also indicate complex relationships between measures of preceding-year export performance and current-year export performance, and therefore highlight the importance of employing multiple measures of export performance. For instance, satisfaction with the preceding year’s performance reinforces export performance improvement (in terms of performance achievement, export intensity, and export satisfaction) in the Role of past performance in export ventures Luis Filipe Lages et al 317 short term. It can be argued that satisfaction with past performance facilitates the availability of more resources, which in turn enables the firm to search broadly for information and to conduct the indepth analyses necessary to promote and sustain strong performance into the future. However, it is important to note that export intensity in the preceding year was found to negatively influence current-year export performance achievement and satisfaction with export performance. One explanation for the negative effect of past-period export intensity might be that when export intensity in the prior period is high, the firm increases slack and decreases effort on the exporting operations, which may negatively affect performance achievement, satisfaction, and export intensity in the short run. This finding is supported to some extent by the negative relationship found between the preceding year’s export performance achievement and current-year export satisfaction. An alternative explanation for why past performance achievement and export intensity would yield a negative effect on current-year performance improvement is the possibility that maintaining high levels of export intensity or ambitious performance goals is difficult year to year. Since the majority of the firms in the sample are in medium to high stages of exporting involvement (over 80% of the sampled firms have maintained international operations for more than eight years), these firms may have high goals and expectations for the following year. Consequently, the likelihood of frustrating or falling short of expectations increases. At these levels, little room exists for improvement, and more often than not firms might only reduce or slightly increase their export intensity and achievement of objectives in the short term. This inability to improve might explain the lack of a significant relationship between past and current performance achievement, as well as the lack of influence of the preceding year’s export performance on marketing strategy adaptation when viewed within organizational learning theory. Specifically, organizational learning suggests that managers work to identify associations between firm-level behaviors that are associated with positive and negative outcomes, repeating those behaviors that drive positive outcomes and eliminating behaviors that result in negative outcomes (Cyert & March, 1963, Levinthal & March, 1981; Sullivan & Nonaka, 1986). Further, the findings of this study present insights into the influence of internal and external forces on marketing strategy adaptation and current-year export performance. In relation to the influences of internal (management) forces, the results indicate that a firm’s commitment to exporting, as opposed to having significant international experience, facilitates performance improvement in the current year. A possible explanation of this result is that management experience might affect performance primarily in the long term, rather than the short term. Additionally, as managers’ commitment to exporting activities increases, a firm tends to allocate more financial and human resources to these activities, which improves performance in the current period. In relation to the influences of external (market) forces, our results indicate that export market development significantly influenced product, promotion, and distribution adaptation. These findings suggest that external forces play a significant role, and more importantly a more significant role in marketing strategy adaptation than preceding-year export performance or internal forces. The employment of the covariates also added insights into the model. Specifically, as would be expected, as a firm’s export volume increases, there is a positive effect on current performance achievement, satisfaction, and export intensity. This is reflective of organizational learning theory’s reinforcing behavior. Moreover, the results indicate that the further away the export market is, the more pricing and distribution are adapted to the export market. Additionally, as the number of countries exported to increases, promotion mixes are adapted to the export market. This suggests that, as firms gain experience with more markets, they are better able to understand and recognize the specific contingencies of those markets and alter their strategies to fit those markets. Managerial Implications The model presented in this paper helps managers to systematize the short-term relationships operating in the complex export-marketing phenomenon and, simultaneously, might help to improve their marketing expertise and enhance their ability to protect and perform better in the domestic market. First, the results indicate that firms are likely to improve their export performance in the short term if they are more committed to export operations. Hence, companies may profit by investing in exporting operations by allocating more human and financial resources to these activities. However, marketing strategy may be more difficult to adapt Journal of International Business Studies Role of past performance in export ventures Luis Filipe Lages et al 318 so as to alter performance in the short term. Export managers are particularly encouraged to reflect on the fact that quite often it will not be possible to see the effects of preceding strategies in the long run because strategies are determined every year as a reaction to the previous year’s results. Second, results suggest that marketing strategy definition in the short term is strongly influenced by internal and external forces of the firm as well as by past performance levels. Short-run adaptive strategies require significant resources (both financial and human), and should be used when the firm is exporting to developed markets, or has a strong commitment to those markets. Additionally, the findings might also be informative when a firm is assessing its propensity to explore new markets, as at this stage the firm may have to take into account the degree of competition and market development in making the decision. Third, the results highlight the importance of action, in that if the previous year’s performance is unsatisfactory, failure to adapt will result in continued failures. It is particularly interesting to observe the negative relationship between past export intensity and current-period performance. This might suggest that firms chase annual performance when the importance of the export activity within the firm is lower. By better understanding the relationship between past and current-period performance, and by making the appropriate coalignment with the internal and external context of the export venture, managers can avoid repetition of unsatisfactory export performance. LIMITATIONS AND DIRECTIONS FOR FUTURE RESEARCH Although this study provides a number of new insights, it is important to note its limitations. We will address future research directions in the context of, and as extensions to, the limitations. First, this study employed a cross-sectional survey method, and therefore suffers from the common limitations of the method, for example, cross-sectional design, common method. Although we attempted to capture the dynamics of the exporting phenomenon by focusing each question on specific time periods, thus building in a logical progression, the study is cross-sectional. Future research should seek to overcome this limitation. Also, the survey methodology may have created common method variance, which could have inflated construct relationships. This inflation could be particularly threatening if the respondents were aware Journal of International Business Studies of the conceptual framework of interest. However, if common method bias exists, a CFA containing all constructs should produce a single method factor (Podsakoff & Organ, 1986). The goodnessof-fit indices (CFI¼0.60, IFI¼0.60, TLI¼0.58) indicate a poor fit for the single-factor model, which suggests that biasing from common method variance is minimal. Future research could address this issue via data collection from multiple sources, such as other elements involved in the supply chain (see Skarmeas, Katsikeas, & Schlegelmilch (2002) for the importer side). Further, the research context limits the findings. The fact that the research context involved only one country and small to moderate size firms may limit the generalizability of the results to some degree. However, Western countries in situations similar to that of Portugal may also benefit from the findings. For example, since American and British firms tend to be more orientated to short-term objectives than their Japanese rivals (Doyle, Saunders, & Wong, 1986, 1992), the framework presented here might better explain export marketing reality within their context. Nevertheless, it would be interesting to apply this framework, for example, to Japanese exporters to better understand possible short-term reactions of firms that are typically long-term oriented (Doyle et al., 1986, 1992; Wong, Saunders, & Doyle, 1987). Extending beyond the limitations, we believe that this research provides a foundation for significant research endeavors to advance the field. For example, this research has shown the empirical link between previous year and current performance improvement. However, research still needs to investigate this link systematically and thoroughly. As stated by Sinkula et al. (1997: 308), ‘‘the extent to which organizations are able to store and access past lessons of history will affect their ability to maintain a steady pace of long-term learning that continuously builds from the past.’’ By considering how strategy is affected in the short term, we provide insight into the building blocks of longterm learning. Our results indicate that, in the short term, performance satisfaction tends to be perpetuated, so that negative past performance satisfaction leads to negative current-period performance satisfaction, and vice versa. However, is it possible through marketing strategy development to break a negative cycle and improve performance satisfaction in the short term? Conversely, both past export performance achievement and export intensity lead to lower Role of past performance in export ventures Luis Filipe Lages et al 319 export performance (in terms of performance achievement, export intensity, and performance satisfaction) in the short term. This finding suggests that prior performance exerts complex effects on marketing strategy and current performance, and that this effect varies, depending on which dimension of performance is being considered. Specifically, additional research should explain how past performance affects current performance, particularly when different measures of past performance are negative or positive. Overall, this remains an intriguing direction for future work. We hope that the empirical findings of this study will encourage academic researchers to reflect more often on the importance of previous export performance for current export marketing strategy and current export performance. Further, past research suggests that long-term success is founded upon the capability not only to learn when faced with environmental changes, but also to adapt continuously in the short term, even when the firm is performing well (Sinkula et al., 1997). Hence, research opportunities exist in the investigation of learning simultaneously through exploration- and exploitation-type capabilities (cf. Atuahene-Gima, 2005; March, 1991; Özsomer & Gençtürk, 2003). Research indicates that, through the refinement of existing knowledge, export managers are expected to exhibit a self-reinforcing bias toward exploitation learning – more short-term oriented – which will damage their capacity for explorative learning – more long-term oriented (Levinthal & March, 1993). We therefore argue that future export marketing research relating to understanding the balance between exploitation and exploration learning capabilities and their influence on short- and long-term export marketing performance could provide new insights into the field. Additionally, the majority of organizational learning theorists accept that organizational learning ultimately manifests itself through organizational actions (Sinkula et al., 1997). In this study we focus on marketing strategy modifications (export adjustments of domestic strategies) as a consequence of previous performance. Future research is strongly encouraged to analyze whether a strategy (e.g., degree of innovation vs disinnovation) has been changed from one year to the following in response to past performance, and the rationale behind this change. In summary, the findings of this study provide theoretically founded contributions to the extant literature related to export marketing performance. This study was motivated, to some extent, by Morgan et al.’s (2004) call for more theory-driven export performance research. Through the employment of organizational learning theory, and more specifically exploitation learning capabilities, we were able to develop and test a model of short-term export performance. The findings of this research echo Madsen’s view (1998: 82) that ‘‘the real world is not as simple as the economic theory, according to which the long-term profitability or maximization of rent-earning abilities are the ultimate goals for the firm.’’ Clearly, managers appear oriented toward the short term when they define their strategies and assess the performance of an export venture. By better understanding this phenomenon, we increase our understanding of strategy definition and its evolution in international marketing exchanges. ACKNOWLEDGEMENTS This research was funded by the following research grants to the first author: by FCT-EU (2000–2001) while a Visiting Scholar at MIT Sloan School of Management and Stanford University Graduate School of Business; by NOVA EGIDE (2001–2007) and 6th European Framework Program (2004–2006) while affiliated with Universidade Nova de Lisboa; and by FCT-EU (2006) while a Visiting Scholar at London Business School. The authors acknowledge Tim Ambler, Pedro Pita Barros, James Harris, Jose Mata, David Montgomery, Aviv Shoham, Jose Tavares, JIBS’ editors, and three anonymous reviewers for comments on earlier versions of the manuscript. NOTES Earlier research on the impact of export market forces on export performance yields mixed findings (cf. Austin, 1990; Beamish, Craig, & McLellan, 1993; Sriram & Manu, 1995). In light of these mixed results, and the lack of strong theory based upon organizational learning to posit such relationships, we do not hypothesize the relationships between the export market forces and performance improvement in the current period. 2 However, while taking into consideration the comment of an anonymous reviewer, we split the sample into exporters of consumer products (n¼416) and exporters of industrial products (n¼103). After analyzing the correlation matrices we found some support for H1. An analysis of the correlations revealed that, for industrial exporters, distribution adaptation is significantly correlated with current-period export intensity (r¼0.21, po0.05). This split also indicated 1 Journal of International Business Studies Role of past performance in export ventures Luis Filipe Lages et al 320 that our initial finding, that product adaptation is negatively correlated with performance achievement, is found to be significant only in the case of consumer goods (r¼0.12, po0.05). 3 After splitting the sample, we found additional support for H2d because for industrial exporters a firm’s commitment to exporting is significantly correlated with distribution adaptation (r¼0.21, po0.05). While taking into consideration the comment of an anonymous reviewer, we used the mean of the past performance factors to divide the sample into exporters with low/high past export intensity (n¼265/ n¼254), low/high past performance achievement (n¼240/n¼279), and low/high past satisfaction (n¼212/n¼307). After splitting the sample, we found that commitment is correlated with promotion adaptation when past intensity (r¼0.20, po0.01) and past satisfaction (r¼0.14, po0.05) are high. Moreover, commitment is also correlated with distribution adaptation when both past intensity (r¼0.16, po0.05) and past satisfaction (r¼0.12, po0.05) are high. 4 Surprisingly, we found that the correlations between commitment and the three dimensions of current performance (intensity, achievement, and satisfaction) are positive only for exporters of consumer goods (r¼0.15, po0.01; r¼0.15, po0.01; r¼0.13, po0.01, respectively). We also found that the relationship between commitment and the three dimensions of current performance is positive only when past intensity is low (r¼0.20, po0.01; r¼0.17, po0.01; r¼0.16, po0.05, respectively), past achievement is low (r¼0.24, po0.01; r¼0.19, po0.01; r¼0.19, po0.01, respectively), and past satisfaction is low (r¼0.21, po0.01; r¼0.17, po0.05; r¼0.20, po0.01, respectively). 5 However, after dividing the sample we found some support for H3. For exporters of consumer products, experience is significantly correlated with distribution adaptation (r¼0.10, po0.05). Moreover, we also found that when satisfaction with past performance is low there is a positive correlation between experience and distribution adaptation (r¼0.17, po0.05). 6 After splitting the sample we found partial support for H5. In the case of exporters of consumer products, experience is significantly correlated with currentexport intensity (r¼0.12, po0.05), current performance achievement (r¼0.16, po0.01), and current performance satisfaction (r¼0.15, po0.01). Surprisingly, we also found that experience is correlated with the three dimensions of current performance (intensity, achievement and satisfaction) only when past intensity is high (r¼0.12, n.s.; r¼0.20, po0.01; r¼0.16, po0.01, respectively), past achievement is low (r¼0.18, po0.01; r¼0.17, po0.01; r¼0.17, po0.01, respectively), and past satisfaction is low (r¼0.18, po0.05; r¼0.21, po0.01; r¼0.23, po0.01, respectively). 7 After splitting the sample, we found that only in the case of consumer goods is export market development positively correlated to product (r¼0.16, po0.01), promotion (r¼0.15, po0.01) and distribution (r¼0.16, po0.05). 8 Although we did not hypothesize specific effects between export market forces and current-period performance improvement, we estimated the effects, only to find that export market forces produces no significant effects on current-period export intensity (g53¼0.01, n.s. for market development and g54¼0.06, n.s. for competition), performance achievement (g63¼0.02, n.s. for market development and g64¼0.08, po0.10 for competition) or current-period performance satisfaction (g73¼0.04, n.s. for market development and g74¼0.01, n.s. for competition). 9 However, we found some support for H7. 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Role of past performance in export ventures Luis Filipe Lages et al 323 APPENDIX: SCALE ITEMS AND RELIABILITIES Scale: 1¼much worse in 1998 than in 1997; 5¼much better in 1998 than in 1997 a¼Internal reliability (Cronbach, 1951) rvc(n)¼Variance extracted (Fornell & Larcker, 1981) r¼Composite reliability (Bagozzi, 1980) Preceding Year’s Performance Performance achievement in preceding year (a = 0.92; qvc(n) = 0.67; q = 0.91) Question: How well did your company achieve the following objectives for the main export venture in 1997? Scale: 1¼very badly; 5¼very well Export sales volume (unit sales) Export sales revenue Export profitability Market share in the main importing market Overall export performance Export intensity in preceding year (a = 0.96; qvc(n)¼0.86; q = 0.95) Question: With regard to your main export venture in 1997, how do you assess the following? Scale: 0–9%; 10–29%; 30–59%; 60–84%; 85–100% Percentage of exporting venture to total sales volume (unit sales) Percentage of exporting venture to total sales revenue Percentage of exporting venture to total profitability Satisfaction with preceding year’s performance (a = 0.94; qvc(n) = 0.77; q = 0.94) Question: How satisfied are you with the 1997 results of your main export venture? Scale: 1¼not satisfied at all; 5¼extremely satisfied Export sales volume (unit sales) Export sales revenue Export profitability Market share in the main importing market Overall export performance Export sales volume (unit sales) Export sales revenue Export profitability Market share in the main importing market Overall export performance Export intensity improvement in current period (a = 0.96; qvc(n)¼0.87; q = 0.95) Question: With regard to your main export venture, to what extent did the following change from 1997 to 1998? Scale: 1¼large decrease from 1997 to 1998; 5¼large increase from 1997 to 1998 Percentage of exporting venture to total sales volume (unit sales) Percentage of exporting venture to total sales revenue Percentage of exporting venture to total profitability Satisfaction with performance improvement in current period (a = 0.97; qvc(n)¼0.84; q = 0.96) Question: How satisfied are you with the results of your main export venture from 1997 to 1998? Scale: 1¼much less satisfied in 1998 than in 1997; 5¼much more satisfied in 1998 than in 1997 Export sales volume (unit sales) Export sales revenue Export profitability Market share in the main importing market Overall export performance Adaptation of the Marketing Mix Question: Consider the main export venture over the past year (1998). To what extent do the following aspects differ in comparing the main export market to the domestic market? Scale: 1¼no adaptation; 5¼extensive adaptation Current Performance Improvement Performance achievement improvement in current period (a = 0.95; qvc(n)¼0.79; q = 0.95) Question: How well did your company achieve the following objectives for the main export venture from 1997 to 1998? Product adaptation (a = 0.81; qvc(n) = 0.52; q = 0.81) Product brand name Product design Product labeling Variety of the main exporting product line Journal of International Business Studies Role of past performance in export ventures Luis Filipe Lages et al 324 Promotion q = 0.89) adaptation (a = 0.89; qvc(n)¼0.62; Advertising theme Media channels for advertising Promotion objectives Budget for promotion Direct marketing Pricing adaptation (a = 0.85; qvc(n)¼0.59; q = 0.85) Determination of pricing strategy Concession of credit Price discounts policy Margins Distribution adaptation (a = 0.87; qvc(n)¼0.63; q = 0.87) Criteria for selection Transportation strategy Distribution budget Distribution network Internal (Management) Forces Firm’s commitment to exporting (a = 0.81; qvc(n)¼0.53; q = 0.82) Question: Consider the main export venture over the past year (1998). To what extent do you agree or disagree with the following statements? Scale: 1¼strongly disagree; 5¼strongly agree There was substantial planning for this export venture There was a significant amount of human resources involved in the exporting activity There was a significant degree of management commitment to exporting There were more financial resources for exporting than those used for the domestic market Management international experience (a = 0.75; qvc(n)¼0.45; q = 0.76) Question: Consider the people involved in your main export venture during the past year (1998). How would you classify their: Scale: 1¼None; 5¼Substantial Degree of professional exporting experience Degree of overseas experience–live/work abroad Degree of training in international business, for example, attended formal courses and export seminars Journal of International Business Studies Ability to follow up on trade leads in the main importing market External (Market) Forces Export market development (a = 0.77; qvc(n)¼0.63; q = 0.77) Question: Considering the main export venture over the past year (1998), how would you characterize the following aspects of the export market? Scale: 1¼none; 5¼substantial Degree of country’s development Level of consumer education in the importing country Export market competition (a = 0.79; qvc(n)¼0.56; q = 0.79) Question: Considering the main export venture over the past year (1998), how would you characterize the following aspects of the export market? Scale: 1¼none; 5¼substantial Extent of price competition in the industry Competition in the accomplishment of delivery deadlines Competition in the industry Covariates Size of the firm Question: What was the total number of full-time employees working in your firm last year (1998)? Scale: 1–9; 10–19; 20–49; 50–99; 100–499; X500 Distance of export market to Portugal Question: Please indicate which was, in 1998, your company’s main importing country of your main exporting product (or group of products): _______ (please indicate one country only) Scale: The distance in kms was computed as the difference between Lisbon (Portugal) and the capital of the country. Number of markets Question: Last year (1998), how many countries imported your main exporting product? Scale: 1; 2–4; 5–9; 10–25; 425 Export sales value Question: What was your company’s total export sales for last year (1998)? Scale: ph100,000; h100,001–350,000; h350,001– 1.5m; h1.5m–3.5m; h3.5m–5m; h5m–35m; h35m– 145M; Xh145M Role of past performance in export ventures Luis Filipe Lages et al 325 ABOUT THE AUTHORS Luis Filipe Lages is Associate Professor of Marketing and International Business at Universidade Nova Lisboa, Portugal, and Visiting Scholar at MIT’s Deshpande Center for Technological Innovation. Born in Portugal, he is a Portuguese citizen. He received his PhD in marketing and international business from Warwick University, UK. His research interests include international marketing, measurement of intangibles, innovation/disinnovation strategy, and technology-market transfer. His publications have appeared in the Journal of International Marketing, Journal of Business Research, Industrial Marketing Management, among others. He can be reached at [email protected]. Sandy D. Jap is the Caldwell Research Fellow Associate Professor of Marketing at the Goizueta Business School at Emory University. Born in Indonesia, she is a US citizen. She received her doctorate in marketing from the University of Florida, USA. Her research interests include the development and management of interorganizational relationships and e-procurement processes such as online reverse auctions. She has published in the Journal of Marketing Research, Journal of Marketing, Management Science, and Organization Science. She can be reached at [email protected]. David A. Griffith is Associate Professor of Marketing in the Eli Broad Graduate School of Management at Michigan State University. His research interests include international marketing strategy and the employment of firm resources for strategic marketing effectiveness. He has published in the Journal of Marketing, Journal of International Business Studies, Journal of Operations Management, etc. He earned his PhD at Kent State University and is a native of the US. He can be reached at griffith@ bus.msu.edu. Accepted by Arie Y Lewin, Editor-in-Chief, 20 April 2007. This paper has been with the authors for three revisions. Journal of International Business Studies