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International Business Review 13 (2004) 383\u2013400

Sources of export success in small-
and medium-sized enterprises: the impact of
public programs

Roberto Alvarez E.\u00c3
Department of Economics, University of Chile, Santiago, Chile

This paper analyzes di\ufb00erences in \ufb01rm exporter performance for small- and medium-sized enterprises (SMEs). Traditionally, it is argued that these \ufb01rms face several disadvantages for competing in international markets. Few studies, however, exploit the fact that successful exporters exist within this group. Using data for Chilean \ufb01rms, we study various explana- tions for di\ufb00erences between sporadic and permanent exporters. Our results suggest that greater e\ufb00ort in international business, process innovation, and the utilization of export pro- motion programs contribute positively to export performance in SMEs. In addition, we \ufb01nd that some forms of intervention are better than others: trade shows and trade missions do not a\ufb00ect the probability of exporting permanently, but exporter committees show a positive and signi\ufb01cant impact.

#2004 Elsevier Ltd. All rights reserved.
Keywords:Export performance; Export promotion; Small- and medium-sized enterprises
1. Introduction

International evidence suggests that \ufb01rm size matters for exporter performance. Several reasons have been provided to explain why larger \ufb01rms perform better in international markets. Advantages associated with scale economies and specializa- tion, better access to \ufb01nancial resources in capital markets, and improved capabili- ties to take risks are among these reasons (Wagner, 2001). Also, evidence in

\u00c3Present address: The Anderson School of Management, University of California, Entrepreneurs Hall,
Suite C-525, 110 Westwood Plaza, Los Angeles, CA 90095-1481, USA. Tel.: +1-310-825-8207; fax: +1-
E-mail address:ralvarez@anderson.ucla.edu (R. Alvarez).
0969-5931/$ - see front matter# 2004 Elsevier Ltd. All rights reserved.
Roberts and Tybout (1997) and Bernard and Jensen (1999)regarding the existence

of sunk costs to entering international markets implies that small- and medium- sized enterprises (SMEs) face greater limitations than larger \ufb01rms to be successful exporters.

There are, however, \ufb01rms within the group of SMEs that have been able to com- pete successfully in international markets. Yet, few empirical studies exploit this fact. This paper contributes to the discussion of \ufb01rm exporter performance in four ways. First, we compare exporter performance among \ufb01rms of similar size. Second, focusing only on exporters, we distinguish between sporadic and permanent expor- ters. Third, we employ a detailed survey of 295 sporadic and permanent exporters. This survey collects information about \ufb01rm activities not traditionally included in other empirical studies. Fourth, we study evidence in Chile, a country that has experienced a huge increase in export diversi\ufb01cation over the last several decades. The Chilean experience is useful for other developing countries trying to improve the international competitiveness of SMEs.

There are two empirical facts that motivate this paper. First, the probability of exporting is lower for SMEs than it is for larger \ufb01rms. This resembles evidence found in other national economies. In the Chilean manufacturing industry, for instance, only 14% of SMEs have exported goods over the period 1990\u20131996. However, more than 74% of large \ufb01rms have exported goods over the same period. Second, a reduced number of \ufb01rms are able to remain as exporters. Among all exporter \ufb01rms, only about 20% have exported every year of the period. The per- centage of successful exporters for SMEs, however, is even lower: only about a 7% can be classi\ufb01ed as permanent exporters. Contrast this with large-sized \ufb01rms, where successful exporters represent more than 40% of the \ufb01rms in this group (Table 1).

The main question we ask here is why some SMEs are more successful exporters than others \ufb01rms of a similar size. In the next section, we explore various explana- tions through the use of special survey directed at sporadic and permanent exporter \ufb01rms. In the third section, a Probit model is estimated to identify empirically the most important determinants of export performance. The fourth section concludes.

Table 1
Exporter status by size for the Chilean manufacturing industry 1990\u20131996
Export status
Sporadic exporter
Permanent exporter
Sporadic/total exporters
Source: Own calculation based on Nationwide Survey of Manufacturing Establishments (ENIA).

Non-exporters are those \ufb01rms that did not export during any year of the period 1990\u20131996, sporadic exporters are those that exported in some year of this period, and permanent exporters are those that exported in every year of this period.

R. Alvarez / International Business Review 13 (2004) 383\u2013400
2. Possible explanations

In this section, we explore possible explanations for di\ufb00erences in \ufb01rm exporter performance. The approach aims to establish if there are signi\ufb01cant di\ufb00erences in \ufb01rm activities that would explain why some SMEs are more successful than others. First, we present the data source. Second, we test for the existence of statistical dif- ferences over four aspects: (i) technological innovation, (ii) international business management, (iii) manager\u2019s perceptions about obstacles to exporter performance, and (iv) utilization of public instruments available to SMEs for enhancing pro- ductivity and technological capabilities, increasing exports, and improving access to capital markets.

2.1. Data source

The information utilized in this paper was provided by a special survey of exporter SMEs carried out between June and August of 2001. The sample of SMEs was chosen from the Annual Nationwide Survey of Manufacturing Establishments (ENIA) undertaken by the Chilean National Institute of Statistics over the period 1990\u20131996. Out of all manufacturing plants, this survey concerned exporters classi- \ufb01ed as small-sized \ufb01rms (10\u201350 workers) and medium-sized \ufb01rms (50\u2013200 workers).

The sample selection was based on three criteria. First, non-exporter \ufb01rms were not incorporated because this signi\ufb01cantly raised the cost of the survey. Also, it would not contribute to the objective of studying why some \ufb01rms become perma- nent exporters and why others fail to remain as exporters. Second, micro- enterprises (i.e. \ufb01rms with less than 10 workers) were not included since they have a very low probability of exporting. Third, manufacturing \ufb01rms were separated into two main sectors according to comparative advantages of the Chilean econ- omy. The exporter sector includes \ufb01rms from food and beverages (311 and 313),1 wood and furniture (331 and 332), pulp, paper and printing (341 and 342), and chemical products (351 and 352). The other sector includes \ufb01rms from textiles and apparel (321\u2013322), and metallic products (381), for which Chile does not possess a comparative advantage. Export possibilities for these goods still exist, however, particularly to other developing countries.

The universe of \ufb01rms is provided for by the Annual Nationwide Survey of Manufacturing Establishments (ENIA), which we strati\ufb01ed into six groups corre- sponding to the sectors de\ufb01ned above. For each group, the number of surveyed \ufb01rms was chosen from the ENIA universe through a simple random sample with a margin of error of 5%. This guarantees adequate representation of SMEs.2Under these considerations, the total sample was 295 \ufb01rms, 138 of which corresponded to

1The \ufb01gures in parentheses correspond to three-digit sectors of the International Standard Industrial
Classi\ufb01cation (ISIC).
2In statistical terms, 5% means that under the sampling assumptions the sample size was chosen so
that deviations in observed values are no larger than 5% from the \u2018\u2018assumed\u2019\u2019 true parameter, where the
true parameter is the population proportion with an uninformative expected value of 0.5.
R. Alvarez / International Business Review 13 (2004) 383\u2013400

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