J 1540-627X 2008 00253 X

Journal of Small Business Management 2008 46(4), pp.
485511
Market Orientation and Internationalization in Small and Medium-Sized Enterprises

by Julia M. Armario, David M. Ruiz, and Enrique M. Armario
This article builds on studies from the literature on market orientation (MO) and internationalization to develop a model and a set of hypotheses regarding the relationships among MO, knowledge acquisition (KA), and market commitment (MC), and the direct and indirect effects of these variables on the performance of small and medium-sized enterprises (SMEs) in foreign markets. The model and its hypotheses are tested by means of an empirical study of a multi-industry sample of Spanish SMEs operating in foreign markets. The results, obtained by structural equation modeling, indicate that a direct positive relationship exists between MO and a strategy of internationalization, and that the effect of MO on performance in foreign markets is moderated by KA and MC.
Introduction
There are two major perspectives on the process of internationalization of small and medium-sized enterprises (SMEs). The rst perceives the internationalization of SMEs as being a sequential process that leads from a domestic market to international markets in accordance with a learning process, whereby knowledge of the new markets is acquired and resources are increasingly committed to those markets (Johanson and Vahlne 1990, 1977; Cavusgil 1980;
Bilkey and Tesar 1977). The second perspective, derived from the international entrepreneurship literature, contends that a rm can be born global (Rialp, Rialp, and Knight 2005; Andersson and Wictor 2003; McDougall, Oviatt, and Shrader 2003; Kuemmerle 2002; McDougall and Oviatt 2000; Madsen and Servais 1997; Knight and Cavusgil 1996; McDougall, Shane, and Oviatt 1994). The current state of research suggests that, in mature industries in which environmental change is minimal, the sequential perspective on
Julia M. Armario is associate professor of Business and Economics at the University of Malaga, Spain. David M. Ruiz is associate professor in marketing at the University of Seville. Enrique M. Armario is senior lecturer in marketing at the University of Seville. Address correspondence to: Enrique M. Armario, University of Seville, C/ S. Fernando, 4, C.P. 41004-Seville, Spain. E-mail: earmario@us.es.
ARMARIO, RUIZ, AND ARMARIO
485
internationalization is more appropriate, whereas, in growing industries, the second perspective provides a better understanding of the internationalization phenomenon. This assessment of the applicability of the two perspectives is predicated on the observation that, in the earlier stages, the internationalization of SMEs can be inuenced by the life-cycle stage of the industry (Andersson 2004). Research has also shown that the possession of certain competencies can facilitate the development of a companys internationalization strategy, especially in the earlier stages of the process (Li, Li, and Dalgic 2004; Yip, Gmez, and Monti 2000). The present study contributes to this line of research by investigating whether market orientation (MO), understood as a specic corporate competence, constitutes an antecedent to internationalization in SMEs. From a behavioral perspective, MO has been dened as the organizationwide generation of market intelligence pertaining to current and future customer needs, dissemination of the intelligence across departments, and organization-wide responsiveness to it (Kohli and Jaworski 1990). As such, MO can also be understood as a company resourcebecause, in terms of the theory of the resource-based view (RBV), MO is an intangible property of the rm that enables it to manage market information and deliver value to its customers (Hunt and Lambe 2000). In this regard, market-oriented behaviors facilitate organizational learning and enhance market knowledge (Day 1994). The acquisition of such knowledge in a single, specic context is not as relevant as the acquisition of the ability to analyze, understand, and respond to a range of contexts. In other words, companies must learn to learn. The present study aims to establish whether this learning process can be applied to foreign marketsthus supporting an SMEs internationalization
strategy. The rst objective of the study is therefore to develop a model that links an SMEs overall MO with its internationalization strategy, and the second objective is to explore the joint effect of these factors on an SMEs performance in foreign markets. Given that the sample of SMEs used in the present study belonged to mature industries, it is presumed that they have followed the sequential-learning approach in their internationalization (Andersson 2004). In this context, three research questions are posed: (1) Does an overall MO facilitate knowledge acquisition (KA) in foreign markets? (2) Does an overall MO foster organizational commitment toward foreign markets? (3) Does an overall MO improve performance in foreign markets? To address these questions, a model is developed, and this is tested in an empirical study of a multi-industry sample of Spanish SMEs operating in foreign markets. The remainder of this article is organized as follows. Following this introduction, the next section reviews the relevant literature on the internationalization of SMEs, the concept of MO, and the relationship between the two. The research objectives and hypotheses are then proposed, followed by the presentation of the proposed model. This is followed by an explanation of the methodology used in the empirical study. An analysis of the results of the study is then provided. The article concludes with a discussion of the major ndings of the study, its limitations, and suggestions for future research arising from it.
Literature Review
Internationalization of SMEs As stated in the introduction, there are two major streams of research on the
486
JOURNAL OF SMALL BUSINESS MANAGEMENT
internationalization of SMEs(1) internationalization as a learning process by an SME; and (2) internationalization from the time of creation of an SME. The rst stream focuses on internal organizational factors, especially during the incremental process of learning in the earlier stages of internationalization. Within this stream, certain specic contributions can be identied. These include the lifecycle model (Vernon 1966), the ethno-centrism, regiocentrism, poly-centrism, geo-centrism (ERPG) model (Wind, Douglas, and Perlmutter 1973), the innovation model (Rogers 1962), and the Uppsala model (Johanson and Vahlne 1977; Johanson and Wiedersheim-Paul 1975). The present study rests on the last of these, the Uppsala model, in developing its theoretical framework. The Uppsala model is based on organizational behavioral theory (Cyert and March 1963). According to the model, the process of internationalization is understood as a causal cycle in which a rms knowledge is posited as an explanatory variable. Essentially, companies initially develop in their domestic markets, and internationalization is a consequence of subsequent incremental decisions. Such decisions are limited by two factorsinformation and resources. It follows that the major barriers to internationalization are a lack of information and a scarcity of resources. Lack of information and scarcity of resources generates uncertainty. To minimize its risks, a rm is likely to begin its internationalization by choosing markets that exhibit less uncertainty. Companies with little international experience would rather enter markets that resemble their domestic markets. In this regard, the concept of psychological distance becomes important in the early stages of the internationalization process. Psychological distance can be dened as a group of factorssuch as language, culture, politics, and so onthat hinder
the ow of information between the company and the market. Once the company has acquired international experience, its decisions on market entry are likely to be more dependent on other factorssuch as market size or the global economic climate. In summary, the Uppsala model rst describes a rms sequence of entry into foreign markets (in terms of the concept of psychological distance), and then describes the subsequent incremental commitment of a rm to foreign markets (in terms of other factors). Models that portray the internationalization of SMEs as a steady process have been criticized for being deterministic and for paying insufcient attention to particular contexts. Andersen (1993), for example, has criticized the underlying theoretical weakness of all process models and the lack of coherence between theory and practice. In spite of this criticism, there is empirical evidence that many SMEs have internationalized in incremental stages (Korhonen, Luostarinen, and Welch 1996; Crick 1995; Larimo 1991; Erramilli and Rao 1990; Luostarinen 1980; Wiedersheim-Paul, Olson, and Welch 1978; Bilkey and Tesar 1977; Weinstein 1977). In particular, SMEs in mature industries are more likely to follow such a sequential process (Andersson 2004). The second stream of research draws on the international entrepreneurship literature and argues that an SME can be international from its creation (Rialp, Rialp, and Knight 2005; Andersson and Wictor 2003; McDougall, Oviatt, and Shrader 2003; Kuemmerle 2002; McDougall and Oviatt 2000; Madsen and Servais 1997; Knight and Cavusgil 1996; McDougall, Shane, and Oviatt 1994). These companies have been described in various ways: (1) born global (Andersson and Wictor 2003; Madsen and Servais 1997; Knight and Cavusgil 1996); (2) global start-ups (Oviatt and McDougall 1994); (3) international new ventures
487
(McDougall, Shane, and Oviatt 1994); and (4) instant exporters (McAuley 1999). The most signicant feature of the born-global rms is that management adopts a global focus from the outset and embarks on rapid and dedicated internationalization. They are usually technology-intensive rms that are formed by active entrepreneursoften in response to a signicant breakthrough in process or technology. Their offerings commonly involve substantial valueadding (McKinsey & Co 1993). McDougall, Shane, and Oviatt (1994) contend that entrepreneurship theory and RBV theory provide valid explanations of the phenomenon of the born-global rms, and that these explanations are in accordance with the recent trends that have characterized this phenomenon(1) the increasing role of niche markets; (2) advances in process technology; (3) advances in communication technology; (4) the inherent advantages of small rms (quicker response time, exibility, adaptability, and so on); (5) the means of internationalization (knowledge, technology tools, facilitating institution, and so on); and (6) the growth in global networks. The relevance of entrepreneurs has been underlined in the literature, which has found a positive relationship between international development and an entrepreneurs international orientation (Zahra, Hayton, and ONeill 2001; Lumpkin and Dess 1996). According to this view, international entrepreneurship evolves from the discovery and exploitation of opportunities in the international marketplace. The pursuit of such opportunities requires the creation of new enterprises (which involves a recombination of resources) (Davidsson and Wiklund 2001; Moran and Ghoshal 1999), together with entry into new markets or market segments (which involves integrated decisions regarding the degree of resource commitment to the market).
MO The term market orientation (MO) has been interpreted in various ways. Some authors use the term as a synonym for customer orientation (Shapiro 1988) or for marketing orientation (Trustrum 1989). Others have understood MO to be a business philosophy that promotes interfunctional coordination to optimize organizational performance (Grnroos 1989). These (and other) interpretations can be classied in two major categories:
(1) A cultural perspective: this conceptualizes MO as part of organizational culturepermanently orientating the company toward the creation and delivery of superior value for its customers (Narver and Slater 1990); and (2) A behavioral perspective: this conceptualizes MO in terms of specic behaviors of the organizationfor example, Kohli and Jaworski (1990), who dened MO as the organization-wide generation of market intelligence pertaining to current and future customer needs, dissemination of the intelligence across departments, and organization-wide responsiveness to it. The two perspectives are not mutually exclusive; indeed, they are complementary. MO implies the development of an organizational culture that generates organizational capabilities through learning; these capabilities are exhibited in certain market-oriented behaviors that ultimately lead to superior market performance. The RBV can help in understanding the nature of MO and its relationship with the achievement of a competitive advantage. According to the RBV, MO can be considered as a resourcebecause it is an intangible property of a rm that enables it to manage market information and deliver superior value for its customers (Hunt and
488
Lambe 2000). According to Day (1994), market-oriented companies develop insideout capabilities, which connect the internal processes that dene organizational capabilities with the external environment, thus allowing the company to be competitive by creating solid relationships with customers, distributors, and suppliers. These distinctive capabilities can be characterized as marketsensing and customer-linking and channel-bonding. Market-sensing refers to the way in which MO enables a rm to learn about its market and anticipate future events. The process of collecting, interpreting, and using market information about customers, competitors, distributors, and suppliers is more systematic and predictable in companies that have a greater degree of MO. Market-sensing processes follow the same general sequence of information-processing activities that an organization uses to learn (Sinkula 1994; Huber 1991). According to this view, market-oriented companies develop the experience and resources to acquire more market information and use it more effectively than companies that are not as market oriented. Kohli and Jaworskis (1990) denition of MO emphasizes the importance of market-sensing capabilities. Customer linking and channel bonding refers to the manner and intensity of a rms relationships with its customers and distributors. Market-oriented companies devote special attention to these relationships to ensure that they understand the particular needs and preferences of their customers and distributors, thus enhancing the process of value creation. The delivery of superior value produces customer satisfaction and enhanced relationships with customers. These, in turn, contribute to better nancial performancegiven the higher protability of loyal customers (Day 1994). These capabilities develop through learning processes as the rms employ-
ees apply their knowledge to the solution of marketing problems. According to Day (1994), these learning processes are characterized by: (1) open-minded inquiry (based on the belief that all decisions are made on the basis of market information); (2) widespread information distribution (which ensures that relevant facts are available when needed); (3) mutually informed mental models (which guide interpretation and ensure that everyone pays attention to the essence and potential of the information); and (4) an accessible memory bank of what has been learned (which ensures that the knowledge can continue to be used). In summary, market-oriented rms acknowledge the relevance of using information about customers and competitors when designing their strategies. These rms can employ this knowledge to create and deliver a better offering than that of competitors in their target markets (Hunt and Lambe 2000). Because MO is a distinctive resource of the company, it allows the rm to develop a specic competitive advantage (Jaworski and Kohli 1993; Narver and Slater 1990), and because it is difcult for competitors to copy this resource, any competitive advantage will be sustainable (Hunt and Morgan 1995). To operationalize a rms MO, the present study adopts the behavioral perspective of Kohli and Jaworski (1990) because: (1) this conceptualization has been extensively validated (Kara, Spillan, and DeShields 2005; Siguaw and Diamantopoulos 1995; Kohli, Jaworski, and Kumar 1993); (2) it focuses on specic behaviors, which facilitates estimation accuracy (Jaworski and Kohli 1993); and (3) it is compatible with the RBV of the present study.
MO and Internationalization of SMEs As previously noted, models such as the Uppsala model (Johanson and
489
Vahlne 1990, 1977) rest on organizational behavior theory. These models portray internationalization as a learning process whereby knowledge for future development is gained from sequential international decisions. Internationalization is thus perceived as an evolutionary process in which companies develop growing levels of commitment to foreign markets as they travel through a series of sequential steps and accumulate decisions (Root 1987; Brooke 1986). Experience becomes an essential factor, because it diminishes the level of uncertainty and risk related to foreign-market decisions. In this regard, there are similarities between internationalization and innovation. There is evidence supporting the application of behavior theory and gradual learning to business internationalization (Forsgren 2001, 2000; Eriksson et al. 1997; Calof and Beamish 1995; Erramilli and Rao 1993, 1990; Hirsch 1993; Erramilli 1991, 1990; Beamish 1990; Kogut and Singh 1988; Root 1987; Sharma and Johanson 1987; Reid 1984; Wiedersheim-Paul, Olson, and Welch 1978). There is also evidence of its usefulness in the context of SMEs (Westhead et al. 2001; Gankema, Snuif, and Zwart 2000), especially when the industry is mature (Andersson 2004), as in the cases considered in this study. In accordance with the RBV approach, MO can also be understood as a corporate competence that supports a rms activities in its markets, including its foreign markets. We support this statement on the following arguments: (1) the learning process leading the SMEs from their domestic markets to the international markets represent one of the essential pillars in the sequential approach of internationalization; (2) the beginning of the internationalization process can be explained through certain corporate competencestechnology, innovatation capabilities, entrepreneurship, etc. (Li, Li, and Dalgic 2004; Yip,
Gmez, and Monti 2000); and (3) competences fostering organization learning such as MOare specially relevant in the internationalization process. Market-oriented capabilities (market sensing; customer linking and channel bonding) facilitate acquisition of knowledge about foreign markets. These capabilities are especially important in the earlier stages of the internationalization process, when the rm has little international experience and is therefore likely to follow its domestic routine in terms of collecting information, disseminating that information across the organization, and designing a corporate response to the market. In this context, the dynamiccapabilities approach (Eisenhardt and Martin 2000) emphasizes the competitive value of MO. According to this approach, it is possible to identify four groups of corporate competencies: (1) managerial competencies; (2) resource-based competencies; (3) transformation-based competencies; and (4) output-based competencies (Lado, Boyd, and Wright 1992). Of these, the resource-based competencies and the transformation-based competencies are especially relevant to the present study. The resource-based competencies consist of core human and nonhuman assets, both tangible and intangible, that allow a rm to outperform rivals over a sustained time. The resource-based competencies have potential to inuence a rms ability to develop transformation-based and output-based competencies. The transformation-based competencies are the organizational capabilities that are required to turn inputs into outputs. These are embedded in the social structure and culture of the rm (Menguc and Auh 2006). Under this typology, MO is a resources-based competence that fosters the development of a corporate culture (transformation-based competence) which, simultaneously, emphasizes the learning and adaptation capabilities of the company. The appli-
490
cation of an MO culture (which is a transformational competence) in foreign markets enables a faster and more effective transformation of the markets information into an appropriate response. In summary, a rms global MO is a distinctive competence that supports the rms activities in its markets. MO can thus be represented as an antecedent of the internationalization process of an SME because: (1) MO fosters and facilitates the learning process in foreign markets; and (2) highly market-oriented companies develop stronger capabilities (market sensing, customer linking, and channel bonding) that allow the acquisition of foreign market knowledge, as well as designing a proper market response.
Research Objectives and Hypotheses

The main objective of this study is to examine whether MO facilitates internationalization of SMEs, thus leading to better performance in foreign markets.
MO and Performance in Foreign Markets The relationship between performance and MO has traditionally been approached from the MO perspective, although authors have disagreed about the performance measure that should be used. According to the resources-based view, MO is a resource (or a competence) that is likely to generate a sustainable competitive advantage leading to superior performance (Slater and Narver 1995). MO is the core of a culture that orientates a rms behaviors toward the creation of value for its customers. A rms MO can thus be assessed in terms of its customersbecause MO focuses on understanding and meeting customers needs and expectations (Dickson 1992). Higher performance can then be attained through success in new product development and improved customerretention rates (Sinkula 1994).
There is evidence of a positive relationship between MO and performance (Pelham 2000, 1993; Slater and Narver 2000; Deshpand and Farley 1999; Pitt, Caruana, and Berthon 1996; Jaworski and Kohli 1993; Ruekert 1992; Narver and Slater 1990). However, these studies have been limited to domestic contexts. Only recently has there been an effort to explore MO in the international context, and this has produced some empirical evidence of a positive link between market-oriented export behaviors and export performance (Cadogan and Cui 2004; Akyol and Akehurst 2003; Cadogan, Diamantopoulos, and Siguaw 2002; Cadogan et al. 2002; Ngansathil 2001; Diamantopoulos, Siguaw, and Cadogan 2000; Know and Hu 2000). In these contributions, examination of the inuence of MO has been limited to the export marketan export-market oriented approach. Nevertheless, Rose and Shoham (2002) have conrmed a positive relationship between a rms overall MO and some dimensions of the export performance. Their studies indicate that MO is a signicant determinant of performance and customer satisfaction in export markets. MO activities help managers to trust in the correct implementation of marketing strategies in foreign markets. As a result of the earlier discussion, the following hypothesis is proposed: H1: MO is positively related to foreignmarket performance.
MO and KA of Foreign Markets MO promotes the acquisition and analysis of information about customers, competitors, and environmental forces, and this knowledge can be used by organizational members to create and deliver superior customer value. From this perspective, a market-oriented company is a learning-oriented company (Tuominen, Mller, and Rajala 1997; Jaworski and Kohli 1996). Both orientations facilitate
491
an awareness of the resources that will be required to compete and achieve a solid competitive advantage (Slater 1996). Market-oriented companies should thus have superior capabilities to sense the market. Because such capabilities involve information generation and dissemination, MO is a dynamic capability that enables a rm to enhance its skills in acquiring new knowledge (Varela, Gutirrez, and Antn 1998) and incorporating it in organizational memory (Slater and Narver 1996). In addition, as noted earlier, the culture of market-oriented rms can be understood as a transformational competence which, through learning, enables a company to transform market information efciently into an appropriate response. Organizational learning strengthens the connection between a company and its environment, thus enabling proactive responses rather than reactive responses. A learning orientation anticipates changes in the market, and enables a company to avoid convulsions (Day 1994; Sinkula 1994). Moreover, a willingness to learn entails the initiation of relationships with customers, suppliers, and other market agents, and the fostering of cooperative attitudes when unforeseen difculties emerge (Webster 1992). The inherent exibility of learningoriented organizations enables them to adapt rapidly to new market opportunities (Slater and Narver 1995). This behavior assists them in comprehending the complexity of the environment and minimizes delays in strategic decisionmaking (lvarez, Santos, and Vzquez 2000). Similarly, Slater and Narver (1996) consider that market-oriented companies possess enhanced capabilities to understand their environment. This implies that they take fewer strategic risks, given that they already benet from information that guides their behavior without threatening their performance. As a con-
sequence, a market-oriented company is likely to cope better with environmental uncertainty in foreign markets, because its knowledge of those markets will be enhanced. As a result of the earlier discussion, the following hypothesis is proposed: H2: MO is positively related to foreignmarket KA.
MO and Commitment to Foreign Markets The effect of MO on commitment to foreign markets can be addressed in terms of the relationship between a companys MO and its entrepreneurial orientation (EO). This complex relationship has received considerable attention from scholars (Bhuian, Menguc, and Bell 2005; Blesa and Ripolls 2005; Weerawardena and OCass 2004; Dimitratos and Plakoyiannaki 2003; Liu, Luo, and Shi 2003, 2002; Atuahene-Gima and Ko 2001; Knight 2000; Miles and Arnold 1991). An accepted conceptualization denes EO as an orientation whereby a rm displays a propensity for innovation, proactivity, and risk taking in its strategic decision-making (Lumpkin and Dess 1996; Covin and Slevin 1986; Miller 1983). In accordance with Schumpeters (1934) criterion, innovation can be apparent in a variety of forms, including new products, new processes, new markets, and so on. EO thus creates new resources and recombines existing resoures to create value (Zahra, Jennings, and Kuratko 1999). Proactivity refers to a rms ability to anticipate environmental changes and to benet from these changes. Finally, risk-taking reects the fact that innovative and proactive behaviors mean that strategic decisions inevitably involve the assumption of certain risks. The relationship between MO and EO has been widely canvassed in the literature. For example, the effect of MO on the innovative behavior of a rm has
492
been demonstrated by the observation that the rate of success in new product development is positively related to a rms MO (Verhees and Meulenberg 2004; Hurley and Hult 1998; Gatignon and Xuereb 1997; Slater and Narver 1994). Moreover, proactivity is an inherent feature of market-oriented rmsin that market information fosters an innovative response to changes in the environment. Market-oriented companies attempt to satisfy the latent and actual needs of their customers by creating value offerings (Slater and Narver 1995). These rms generally adopt a long-term approach to the market and are more likely to develop learning processes. Finally, a propensity for risk taking is a characteristic of the senior management of all market-oriented rms (Jaworski and Kohli 1993). Following these arguments, we contend that entrepreneurial behaviors and market-oriented behaviors display common characteristics. In terms of internationalization, an EO evolves as international opportunities are identied and seized, which usually involves the creation of new companies, entry to new markets, and/or the targeting of new market segments. Such integrated decision-making involves the commitment of resources to the international market. In terms of MO, market-sensing capabilities can assist a rm to discover market opportunities and design a value proposal. Such a value proposal affects the whole organization, because corporate resources must be aligned to create a market-responsive rm (Narver and Slater 1990). MO thus enables a rm to identify new (foreign) market opportunities which, if they are to be seized, requires the commitment of corporate resources to create customer value. Market-oriented companies will therefore be more active in seeking and exploiting foreign market opportunities, and will be more willing to commit resources to this process.
On the basis of the previous discussion, the following hypothesis is proposed: H3: MO is positively related to foreignmarket commitment.
Internationalization as a Learning Process As previously noted, the Uppsala model presents a rms internationalization as being a continuous learning process about the ways to compete internationallya process that requires time and risks. In other words, it is a chain of action leading to experience leading to further action. In this sequence, the outcome of each iteration incrementally increases a companys involvement in a foreign market. A companys learning experience in foreign markets has a profound effect on its future foreign expansion and its performace in foreign markets (Lord and Ranft 2000) as reliable knowledge of those markets reduces costs and uncertainty (Buckley and Casson 1981) and improves protability (Benito and Gripsrud 1992). Ghemawat (1991) has dened commitment as the tendency of an organization to persist in its action course and strategies. In accordance with this denition, market commitment (MC) would refer to the tendency of an organization to maintain strategies in a particular market. According to Pauwels and Matthyssens (1999), MC is a major determinant of performance in foreign markets, and Cavusgil and Zou (1994) (in the North American context) and Louter, Ouwerkerk, and Bakker (1991) (in the European context) have both provided evidence of a positive relationship between MC and performance. Similarly, Gerlinger, Beamish, and Da Costa (1989) have asserted that the process of growing internationalization, as a consequence of incremental foreign-market
493
Figure 1 Proposed Model

KA
scope of the study was limited to a multiindustry sample of SMEs that were operating in foreign markets from their base in Andalusiaan underdeveloped region in the south of Spain with a gross domestic product less than that of 75 percent of countries in the European Union (EU). The sample included:
PERF
MO
MC
commitment, will improve performance in foreign markets. As a result of the previous discussion, the following hypotheses are proposed: H4: Foreign-market KA is positively related to foreign-market commitment. H5: Foreign-market KA is positively related to foreign-market performance. H6: Foreign-market commitment is positively related to foreign-market performance. Figure 1 shows the proposed model, along with the hypotheses. In this model: (1) MO represents market orientation; (2) KA represents knowledge acquisition; (3) PERF represents [foreign-market] performance; and (4) MC represents market commitment.
Agricultural as well as food and beverage companies (food and drinks; ecological products; white goods; shing products)which accounts for 45.7 percent of exports from the Andalusia region; Consumer goods (gifts and handicrafts, furniture and decoration, jewelry, oriculture and ornamental plants, clothing, shoes, perfumes and cosmetics, paper, music and audiovisual)which accounts for 25.7 percent of exports from the region; and Industrial goods (general equipment; auxiliary equipment for agriculture, energy, and environment; construction materials; information technology; automobiles; climate control; and other equipment) which accounts for 28.6 percent of exports from the region. The composition of exports from the SMEs in this region is typical of underdeveloped regions with low economic activity. In addition, the degree of internationalization of the rms in this study was lower than the national average, with exports being the most common method of entry to foreign markets, and the overwhelming majority of those exports being to countries within the EU.
Methodology
Scope of the Study To test the model presented earlier, an empirical study was conducted. The
Sample and Data Collection The recommendations of the European Union (DOCE 96/280/CE) were used to identify SMEs for the sample. In addition, two extra criteria were added for the purposes of the model proposed in this study: (1) number of employees
494
had to be greater than 20; and (2) sales volume had to be greater than 1.5 million euros per annum. These renements led to the discarding of small companies whose management was not professional enough to allow accurate estimation of the constructs of the model. The nal sample included 1,483 companies. These were targeted through a self-administered survey. A total of only 112 valid responses was received, despite the best efforts of researchers engaged in the eld study. Of the nal sample, 47.1 percent of the SMEs were engaged in food/agriculture, 24.5 percent in consumer goods, and 28.4 percent in industrial goods. This was representative of the region as a whole. Data collection was by means of a mail survey addressed to foreign market managers during March and April of 2003; a telephone follow-up was undertaken in May 2003 to improve the response. Although 112 responses might appear to be a small number in absolute terms, other studies of internationalization have worked with samples of similar size (Li, Li, and Dalgic 2004; Akyol and Akehurst 2003; Rose and Shoham 2002; Yip, Gmez, and Monti 2000; Leonidou and Adams-Florou 1999; Leonidou 1998). Nevertheless, the possibility of nonresponse bias was a concern, given the relatively small (7.5 percent) rate of response. The test recommended by Armstrong and Overton (1977) was therefore conducted. This compares the answers from the rst incoming surveys with the latest received surveys. The results showed no signicant difference between the two (p = .05) on any item. In order to test the appropriateness of our sample, we compared it to a random sample of 200 companies that did not answer the survey. This test did not show any signicant difference between them in terms of industry dispersion, age, sales volume, and protability. In addition to the reassuring results of this test, it should be noted that any
nonresponse bias that might be present is more likely to affect individual measures, rather than causal relationships among variables studied herewhich are more likely to be affected by a lack of diversity in a sample (Blair and Zinkhan 2006). In this regard, the present sample was fairly representative of the studied population. Therefore, given that the present study was conrmatory in nature (rather than inferential), the sample was judged to be valid for the objectives of the study.
Measurement Scales and Tools Five-point Likert-type scales were developed to estimate the constructs of the model (see appendices). Measurement scales with reliable psychometric properties, validated in previous empirical studies, were selected. MO MO was estimated with the MARKOR scale (Kohli, Jaworski, and Kumar 1993). Kohli and Jaworskis (1990) conceptualization has been extensively validated (Kara, Spillan, and DeShields 2005; Siguaw and Diamantopoulos 1995), and it focuses on specic behaviors facilitating estimation accuracy. Moreover, it was compatible with the RBV of the present study. The Spanish version of the scale was used. This was developed by lvarez, Santos, and Vzquez (2000), and has been validated in Spanish companies. This scale is comprised of 30 items, of which 14 relate to intelligence generation, 9 to intelligence dissemination, and 7 to market response. In general, this battery aims to capture a rms overall MO through an assessment of specic behaviors. KA KA is divided by the Uppsala model into objective knowledge and experiential knowledge. Objective knowledge is acquired through standardized methods of compiling and transmitting information (market research), and can
495
be easily transferred between markets or imitated by other companies. A critical assumption of Johanson and Vahlnes (1977) model (conrmed by Denis and Depelteau 1985; Reid 1984; Ayal and Zif 1979; Sunzook 1978; Simpson and Kujawa 1974), is that objective knowledge is less important than experiential knowledge in the internationalization process. Such experiential knowledge consists of business knowledge (customers, competitors, and market) and institutional knowledge (government, institutional structures, market norms and rules) (Eriksson et al. 1997). In the present study, KA was estimated with a ve-item scale adapted from Eriksson et al. (1997). Given that KA was measured in a given rms major exporting market (EU, North America, South America, Africa, Asia), this construct should be different from MO.
share of committed resources devoted to international operations). Gundlach, Achrol, and Mentzer (1995) identied an attitudinal dimension of MC. Most of the empirical studies in foreign markets have operationalized this dimension as an evaluation of the support of senior management with respect to a particular market (Pauwels and Matthyssens 1999). Taking these views into account, the present study developed a four-item scale to measure MC. Three of these measured economic commitment, and one estimated attitudinal commitment. MC measures were made with respect to a given rms major exporting market the EU, North America, South America, Africa, or Asia.
MC MC is apparent when a company devotes resources to a particular market. In the case of international investments, this usually involves a high level of commitment. Dynamic markets require dynamic responses, which cannot be achieved without a high level of commitment (Benito and Welch 1997). The success of such a commitment might not be measured purely in economic terms; in addition, competitive advantage and useful knowledge for continuing the internationalization process might be obtained. To assess foreign-market commitment, Yip, Gmez, and Monti (2000) suggested that several issues should be taken into account: (1) structure-related issues (structural changes consequent upon foreign-market entry); (2) strategyrelated issues (specic strategic commitments, such as the development of cultural-integration programs or training programs for local salesforce); and (3) human-resources issues (regarding the
Foreign-Market Performance Because most of the SMEs used exports as the primary method of entry to foreign markets, foreign-market performance was estimated with validated scales measuring export performance. Organizational characteristics have direct and indirect effects on export performance, but they have not been evaluated within an integrated, comprehensive theoretical framework (Rose and Shoham 2002). Export sales and/or intensity have been used as indicators of the export performance, as has the proportion of export sales over total sales in both absolute and relative terms. The present study adapted the scale developed by Shoham (1998), which consists of four dimensions: sales, prots, sales growth, and prots growth. This was adapted by the addition of one noneconomic itemthe rate of success of new products in foreign markets (Katsikeas, Leonidou, and Morgan 2000). This item was added to capture the impact of MO on performance through innovation (Verhees and Meulenberg 2004; Gatignon and Xuereb 1997). The scale developed by Shoham (1998) is similar to other research that has ana-
496
lyzed the relationship between MO and performance (Pelham 2000, 1997). As previously, this dimension was measured with respect to the rms major exporting market.
Analysis of Results
Measurement Model An exploratory factor analysis (EFA) was rst conducted to identify the underlying dimensions in each scale. Reliability and internal consistency were then estimated using Cronbachs alpha, item reliability (R2), composite reliability, and average extracted variance (AEV). The results are shown in Table 1. After estimating the MO measurement model, MO dimensions were averaged into a single item. This procedure facilitates the estimation of model parameters when the sample is small (Mackenzie, Podsakoff, and Ahearne 1998). The EFA had identied ve dimensions of MOthree belonging to information generation (M1, M2, and M3), one to information dissemination (M4), and one to market response (M5). Cronbachs alpha estimation suggested that some items should be rened as a result of their poor reliability. Thus,
M1 included items G2, G3, and G4; M2 included items G6, G10, G13, and G14; M3 included items G5, G7, G8, and G12; M4 remained unchanged (from D1 to D9); M5 included R1, R3, R5, and R7 (see Appendix). As can be seen in Table 1, MO demonstrated good reliability and validity (convergent and discriminant). The scales for KA and MC were onedimensional, with ve items and four items, respectively. These showed adequate convergent validity and reliability. Missing values have affected the scale of export performance, so we have elimi-
nated those items where the missing values do not follow a random distribution. Thus, the export performance scale was rened to ve items: EXP (export sales), TGRS (growth of export sales), PRO (prots), GPROF (growth of prots), and NP (success rate in new products). The item representing exporting propensity was discarded from the performance scale in view of its poor reliability. The nal battery displayed good psychometric properties. Table 2 shows the results for discriminant validity by comparing AEV and correlations among the constructs. KA and MO were conrmed as different constructswith MO being globally related to the rm, whereas KA referred to the rms major exporting market.
Structural Model
SEM methodology was used to analyze the causal model and to test the proposed hypotheses. The results of the tests of the structural model are displayed at the bottom of Table 1. As can be seen, all the hypothesized relationships were signicant (t > 1.96; p < .05), except for the relationship between MO and MC, which was weaker (t = 1.77; p < .07). The relationship between a rms overall MO and its export performance was signicant and positive (standardized loading = 0.35; p < .05), thus providing support for H1. In addition, MO had an indirect effect on export performance through KA and MC, similar to the direct effect (0.39). It can thus be concluded that MO capabilities signicantly contributed to a rms foreign-market activities, as shown by the total effect (0.74) in Table 3. H2 postulated that a rms overall MO has a positive inuence on foreignmarket KA. The results showed a statistically signicant relationship, and it is therefore concluded that MO capabilities strongly facilitated the efcient and
497
Table 1 Measurement and Structural Model

Global Adjustment Measures Proponed Model c2/df (p) 131.7/125 (p = .323) CMIN/DF 1.054 GFI 0.840 RMSR 0.144 CFI 0.931 RMSEA 0.025
Measurement Models Critical Coefcient Market Orientation (MO) (Alpha = 0.894; AEV = 0.750; Comp. Reliab. = 0.930) M1 M2 7.70 M3 8.25 M4 6.04 M5 5.17 Knowledge Acquisition (KA) (Alpha = 0.921; AEV = 0.760; Comp. Reliab. = 0.940) KA1 KA2 10.88 KA3 8.54 KA4 7.33 KA5 8.54 Market Commitment (MC) (Alpha = 0.870; AEV = 0.740; Comp. Reliab. = 0.920) MC1 MC2 8.42 MC3 7.20 MC4 6.67 Performance (PERF) (Alpha = 0.765; AEV = 0.570; Comp. Reliab. = 0.830) NP TGRS 3.58 PROF 4.55 GPROF 4.63 Standardized Loading R2
0.86 0.83 0.83 0.72 0.63
0.75 0.69 0.69 0.52 0.40 0.42
0.88 0.91 0.87 0.78 0.85
0.77 0.83 0.76 0.61 0.73 0.44
0.89 0.86 0.89 0.80
0.78 0.74 0.79 0.63 0.73
0.61 0.42 0.80 0.81
0.37 0.18 0.65 0.65
498
Table 1 Continued
Relationships and Hypotheses Standardized Loadings PERFOR MO KA MO MC MO MC KA PERF KA PERF MC 0.35 0.65 0.25 0.47 0.34 0.30 Critical Coefcient 2.18 5.14 1.77 3.20 2.04 2.05 p Hypotheses
.03 .00 .07 .00 .04 .04
H1 H2 H3 H4 H5 H6
Table 2 Correlations
Correlations between MO Dimensions MO2 MO1 MO2 MO3 MO4 MO5 0.686 MO3 0.660 0.647 MO4 0.424 0.465 0.498 MO5 0.395 0.633 0.345 0.408 1 AEV 0.511 0.537 0.461 0.549 0.652
Correlations among Constructs KA MO KA MC PERF 0.650 MC 0.550 0.630 PERF 0.740 0.760 0.710 1.000 AEV 0.734 0.756 0.652 0.546 RELIABILITY 0.935 0.917 0.888 0.827
MO, market orientation; KA, knowledge acquisition; MC, market commitment; PERF, performance; AEV, average extracted variance. effective acquisition of knowledge of foreign markets (standardized loading = 0.65; p < .05). H3 postulated that a rms overall MO has a direct effect on MC. The results conrmed a positive relationship (standardized effect = 0.25), although this was signicant only at a level of p < .08. It can therefore be concluded that MO is related to entrepreneurial behavior by an
499
Table 3 Direct, Indirect, and Total Effects

Direct Effects (Standardized) MO KA MC PERF 0.65 0.25 0.35 KA 0.00 0.47 0.34 MC 0.00 0.00 0.30
Indirect Effects (Standardized) MO KA MC PERF 0.00 0.30 0.39 KA 0.00 0.00 0.14 MC 0.00 0.00 0.00
mance. Both hypotheses were conrmed; KA had a direct effect of 0.34 (p < .05) and MC had a direct effect of 0.30 (p < .05) on foreign-market performance. Finally, the explanatory power of the rms MO was tested by comparing a model that included the rms MO as the independent variable with a model that excluded the rms overall MO. The results of this comparisonconducted by means of the indicators of parsimonyare shown in Table 4. As can be noted, the model including MO showed better indicators of parsimony than the alternative model (CMIN/DF, PGFI, and PCFI). It is thus concluded that a rms MO is a corporate competence that supports foreign-market activities.
Discussion, Limitations, and Further Research

Contributions of the Study The major contribution of the present study was to establish MO as a distinctive competence that supports a rms activities in foreign markets. In this context, noteworthy ndings were the positive inuence of a rms overall MO on its market KA and its resource commitment (MC) in the foreign market. With respect to KA, capabilities in cultural transformation and learning (as developed from market-oriented behaviors) facilitate the process of turning information about a foreign market into an appropriate market response. With respect to MC, the present results show that MO constitutes an entrepreneurial feature that promotes proactive behavior in foreign markets and the commitment of greater resources to seize market opportunities. Another contribution of the study is an examination of the direct effect of an SMEs MO on its performance in the international context. The ndings show the existence of a positive relationship between the two, supporting the view that a rms MO has a direct effect on its
Total Effects (Standardized) MO KA MC PERF 0.65 0.55 0.74 KA 0.00 0.47 0.48 MC 0.00 0.00 0.30
SME, whereby a rm seeks opportunities in foreign markets and commits resources to them. MO also showed an indirect effect (0.30) on MC through the acquisition of knowledge of the market. The total effect of a rms MO and MC was signicant and strong (0.55), as shown in Table 3. H4 proposed that a rms knowledge in a particular market was positively related to the committing of resources in that market. Again, the relationship was found to be signicantly positive and strong (standardized loading = 0.47; p < .05), thus conrming this hypothesis. H5 and H6 postulated the effects of KA and MC on a rms export perfor-
500
Table 4 Alternative Model Comparison

Parsimony-Adjusted Measures CMIN/DF PGFI PRATIO PCFI Model with MO 1.054 0.60 0.79 0.76 Model without MO 1.12 0.59 0.79 0.62
international competitiveness. In addition, the present study speculates that an indirect effect of a rms MO on export performance might also existthrough the internationalization variables of KA and MC. It is of interest that this indirect effect was found to be stronger than the direct relationshipillustrating the interaction of MO with a rms learning process in foreign markets. The high explanatory level achieved in the dependent variable (R2 = 0.73) supports the role of a rms MO as a corporate competence behind its international performance. In this regard, by comparing the proposed model with an alternative model without the rms MO as an exogenous variable, the present study empirically conrmed the role of a rms MO as an antecedent of an SMEs internationalization strategy. Finally, our results provide the following contributions to different areas of research: (1) SMEs internationalization: the literature has underlined the relevance of certain corporate competences to initiate the internationalization process (Li, Li, and Dalgic 2004; Yip, Gmez, and Monti 2000). In this context, our research reveals that MO represents an antecedent of the internationalization process for those SMEs that follow a sequential approach. This competence facilitates and incentivates
organizational learning, which is an essential pillar in the sequential model of internationalization. Our results support the strong inuence that MO makes on foreign market KA, as the organizational learning stream of research contends (Day 1994; Sinkula 1994). (2) MO: the literature has emphasized the positive effect of marketoriented behaviors on rms performance (Slater and Narver 2000; Jaworski and Kohli 1993; Narver and Slater 1990). Our results conrm this relationship in the context of foreign markets, following previous research on exportation markets (Cadogan and Cui 2004; Akyol and Akehurst 2003; Cadogan et al. 2002; Cadogan, Diamantopoulos, and Siguaw 2002; Ngansathil 2001; Diamantopoulos, Siguaw, and Cadogan 2000; Know and Hu 2000).
Managerial Implications The ndings of the present research have interesting managerial implications. First, SMEs that wish to improve their international performance and competitiveness would be well advised to develop market-oriented behaviors. By promoting a market-oriented culture, managers will facilitate the development of core capabilities that promote international competitivenesssuch as market sensing, and customer linking and channel bonding. These are outsidein
501
capabilities that link a rms processes with its external environment, thus helping the rm to surpass its competition by creating and enhancing solid relationships with its suppliers, customers, and distributors. Such relationships, if sustained, should improve a rms foreign performance. In addition, a rm that adopts a market-oriented culture will be in a better position to identify and exploit new market opportunities because MO facilitates the acquisition of market knowledge and the committing of resources to capturing them. The literature witnesses to the essential role that managers play in implementing a market-oriented culture in a rm (Kohli, Jaworski, and Kumar 1993). Managerial involvement, commitment, and risk-aversion are essential to the successful development of market-oriented behaviors in a company. Proactive and committed managers are thus critical to the development of a market-oriented culture that will identify and exploit international opportunities and thus enhance a rms international performance.
Limitations and Further Research Every empirical study has certain limitations that restrict the generalizability of the ndings. In this case, it is possible that if the study was conducted on other regions and countries in the world, the magnitude and direction of the relationships in the model may be different. The degree of economic development may account for distinct SME behavior. In addition, given the dynamic nature of the internationalization process, the cross-sectional nature of the study might not have been the most appropriate approach. Although the study has provided strong evidence in support of the hypotheses, a longitudinal study might offer further interesting insights. The low response rate and the small sample represent another potential concern. However, the sample is fairly representative of the population and
there was no evidence of nonresponse bias. Moreover, given the conrmatory nature of the study, the sample can be considered sufcient (Blair and Zinkhan 2006). There are possible lines of future research. In accordance with the industrial economy approach, it would be interesting to test the moderating role of the environment in the relationship between a rms MO and its foreign performance. The research objective would be to identify the optimum level of MO depending on the environmental conditions in foreign markets. This stream of research is supported by the works of Kohli and Jaworski (1990) and Slater and Narver (1994), and has been followed in international markets (Cadogan, Diamantopoulos, and Siguaw 2002; Rose and Shoham 2002). Other lines of research emerge from the RBV, following Li, Li, and Dalgics (2004) contribution. The objective would be to explore the inuence of other corporate competencessuch as an EO, innovation, and technology capabilities on the internationalization process of an SME. The dynamic capabilities approach (Menguc and Auh 2006; Lado, Boyd, and Wright 1992) could be used to explore the joint effect of these competencies on the internationalization process and foreign-market performance.
References
Akyol, A., and G. Akehurst (2003). An Investigation of Export Performance Variations Related to Corporate Export Market Orientation, European Business Review 15(1), 519. lvarez, L. I., M. L. Santos, and R. Vzquez (2000). Anlisis Cultural y Operativo de la Orientacin al Mercado: Efectos Moderadores en la Relacin OM-Resultados, Revista Espaola de Investigacin de Marketing ESIC 4(1), 741. Andersen, O. (1993). On the Internationalization Process of Firms: A Criti-
502
cal Analysis, Journal of International Business Studies 24(2), 209232. Andersson, S. (2004). Internationalization in Different Industrial Contexts, Journal of Business Venturing 19, 851875. Andersson, S., and I. Wictor (2003). Innovative Internationalisation in New Firms: Born-Globals-the Swedish Case, Journal of International Entrepreneurship 1(3), 249276. Armstrong, J. S., and T. S. Overton (1977). Estimating Non Response Bias Mail Surveys, Journal of Marketing Research 14(August), 396402. Atuahene-Gima, K., and A. Ko (2001). An Empirical Investigation of the Effect of Market Orientation and Entrepreneurship Orientation Alignment on Product Innovations, Organization Science 12(1), 5474. Ayal, I., and J. Zif (1979). Market Expansion Strategies in Multinational Marketing, Journal of Marketing 43(2), 8494. Beamish, P. W. (1990). The Internationalization Process for Smaller Ontario Firms: A Research Agenda, in Research Global Business Management, Vol. 1. Ed. A. Rugman. Greenwich: JAI Press, 7792. Benito, G., and G. Gripsrud (1992). The Expansion of Foreign Direct Investments: Discrete Rational Location Choices or a Cultural Learning Process? Journal of International Business Studies 3, 461476. Benito, G., and L. S. Welch (1997). Foreign Market Servicing: Beyond Choice of Entry Mode, Journal of International Marketing 2(2), 728. Bhuian, S. N., B. Menguc, and S. J. Bell (2005). Just Entrepreneurial Enough: The Moderating Effect of Entrepreneurship on the Relationship between Market Orientation and Performance, Journal of Business Research 58, 917. Bilkey, W. J., and G. Tesar (1977). The Export Behaviour of Smaller Wisconsin Manufacturing Firms, Journal
of International Business Studies 9(springsummer), 9398. Blair, E., and G. M. Zinkhan (2006). Nonresponse and Generalizability in Academia Research, Journal of the Academy of Marketing Science 34(1), 47. Blesa, A., and M. Ripolls (2005). Relacin Entre la Orientacin al Mercado y la Orientacin Emprendedora: su Inuencia en el Rendimiento de la Empresa, Revista Europea de Direccin y Economa de la Empresa 14(3), 165180. Brooke, M. Z. (1986). Selling Management Services Contracts in International Business. London: International Thomson Business Press. Buckley, P. J., and M. C. Casson (1981). The Optimal Timing of Foreign Direct Investment, Economic Journal 91, 7587. Cadogan, J. W., and C. H. Cui (2004). Chinese Export Agents Adoption of Export Market-Oriented Behaviours: Measurement and Performance Relationship, Journal of Asia Pacic Marketing 3(2), 2137. Cadogan, J. W., A. Diamantopoulos, and J. A. Siguaw (2002). Export MarketOriented Activities: Their Antecedents and Performance Consequences, Journal of International Business Studies 33(3), 615626. Cadogan, J. W., S. Sundqvist, R. T. Salminen, and K. Puumalainen (2002). Market-Oriented Behaviour: Comparing Service with Product Exporters, European Journal of Marketing 36 (9, 10), 10761102. Calof, J. L., and P. W. Beamish (1995). Adapting to Foreign Markets: Explaining Internationalization, International Business Review 4(2), 115131. Cavusgil, S. T. (1980). On the Internationalization Process of Firms, European Research 8(6), 273354. Cavusgil, S. T., and S. Zou (1994). Marketing StrategyPerformance
503
Relationship: An Investigation of the Empirical Link in Export Market Ventures, Journal of Marketing 58, 121. Covin, J. G., and D. P. Slevin (1986). The Development and Testing of an Organizational Level Entrepreneurship Scale, in Frontiers in Entrepreneurship Research. Eds. R. Ronstad, J. A. Hornaday, R. Peterson, and K. H. Vespers. Wellesley, MA: Babson College, 628639. Crick, D. (1995). An Investigation into the Targeting of UK Export Assistance, European Journal of Marketing 29(8), 7695. Cyert, R., and J. G. March (1963). A Behavioural Theory of the Firm. Englewood Cliffs, NJ: Prentice Hall. Davidsson, P., and J. Wiklund (2001). Level of Analysis in Entrepreneurship Research: Current Research Practice and Suggestion for the Future, Entrepreneurship Theory and Practice 25(4), 8199. Day, G. (1994). Continuous Learning about Markets, California Management Review 36, 931. Denis, J. E., and D. Depelteau (1985). Market Knowledge, Diversication and Export Expansion, Journal of International Business Studies 16(3), 7789. Deshpand, R., and J. U. Farley (1999). Corporate Culture and Market Orientation: Comparing Indian and Japanese Firms, Journal of International Marketing 57(1), 111127. Diamantopoulos, A., J. A. Siguaw, and J. W. Cadogan (2000). Export Performance: The Impact of Cross-Country Export Market Orientation, in Marketing Theory and Applications v.11. Eds. J. P. Workman, Jr and W. D. Perreault, Jr. San Antonio, TX, 177. Dickson, P. R. (1992). Toward a General Theory of Competitive Rationality, Journal of Marketing 56, 6983. Dimitratos, P., and E. Plakoyiannaki (2003). Theoretical Foundations of a International Entrepreneurial
Culture, Journal of International Entrepreneurship 1(2), 187215. Eisenhardt, K. M., and J. A. Martin (2000). Dynamic Capabilities: What are they? Strategic Management Journal 21, 11051121. Eriksson, K., J. Johanson, A. Majkgard, and D. Sharma (1997). Experiential Knowledge and Cost in the Internationalization Process, Journal of International Business Studies 28(2), 337361. Erramilli, M. (1990). Entry Mode Choice in Service Industries, International Marketing Review 5(5), 5062. (1991). Service Firms International Entry Mode Choice: A Modied Transaction-Cost Analysis Approach, Journal of Marketing 57, 19 38. Erramilli, M., and C. P. Rao (1990). Choice of Foreign Market Entry Mode by Service Firms: Role of Market Knowledge, Management International Review 30(2), 135185. Erramilli, M. K., and C. P. Rao (1993). Service Firms International EntryMode Choice: A Modied TransactionCost Analysis Approach, Journal of Marketing 57(3), 1938. Forsgren, M. (2000). Some Critical Notes on Learning in the Uppsala Internationalization Process Model, Working Papers, Department of Business Studies Uppsala University. (2001). The Concept of Learning in the Uppsala Internationalization Process Model: A Critical Review. Working Papers. Department of Business Studies Uppsala University. Gankema, H. G. J., H. R. Snuif, and P. S. Zwart (2000). The Internationalization Process of Small and MediumSized Enterprises: An Evaluation of Stage Theory, Journal of Small Business Management 38(4), 1528. Gatignon, H., and J. M. Xuereb (1997). Strategic Orientation of the Firm and New Product Performance, Journal of Marketing 34, 7790.
504
Gerlinger, J. M., P. W. Beamish, and R. Da Costa (1989). Diversication Strategy and Internationalization: Implications for MNE Performance, Strategic Management Journal 10, 109119. Ghemawat, P. (1991). Commitment: The Dynamic of Strategy. New York: The Free Press. Grnroos, C. (1989). Dening Marketing: A Market Oriented Approach, European Journal of Marketing 23(1), 5260. Gundlach, G., R. S. Achrol, and J. T. Mentzer (1995). The Structure of Commitment in Exchange, Journal of Marketing 59, 7892. Hirsch, S. (1993). The Globalization of Services and Service-Intensive Goods Industries, in Coalitions and Competition: The Globalization of Professional Business Services. Ed. Y. Aharoni. New York and London: Routledge, 6678. Huber, G. P. (1991). Organizational Learning: The Contributing Process and the Literatures, Organization Science 2(February), 88115. Hunt, S., and R. M. Morgan (1995). The Comparative Advantage Theory of Competition, Journal of Marketing 59(April), 115. Hunt, S., and J. Lambe (2000). Marketings Contribution to Business Strategy: Market Orientation, Relationship Marketing and Resourced-Advantage Theory, International Journal of Management Review 2(1), 1743. Hurley, R. F., and T. M. Hult (1998). Innovation, Market Orientation, and Organizational Learning: An Integration and Empirical Examination, Journal of Marketing 62(3), 4254. Jaworski, B. J., and A. K. Kohli (1993). Market Orientation: Antecedents and Consequences, Journal of Marketing 57(July), 5370. (1996). Market Orientation: Review, Renement and Roadmap, Journal of Market Focused Management 1, 119135.
Johanson, J., and F. Wiedersheim-Paul (1975). The Internationalization of the Firm: Four Swedish Cases, Journal of Management Studies 12(3), 305327. Johanson, J., and J. E. Vahlne (1977). The Internationalization Process of the Firm: A Model of Knowledge Development and Increasing Foreign Market Commitments, Journal of International Business Studies 8(1), 2332. (1990). The Mechanism of Internationalization, International Marketing Review 7(4), 1124. Kara, A., J. E. Spillan, and O. W. Deshields (2005). The Effect of a Market Orientation on Business Performance: A Study of Small-Sized Service Retailers Using Markor Scale, Journal of Small Business Management 43(2), 105118. Katsikeas, C. S., L. C. Leonidou, and N. A. Morgan (2000). Firm-Level Export Performance Assessment: Review Evaluation and Development, Journal of the Academy of Marketing Science 28(4), 493511. Knight, G. (2000). Entrepreneurship and Marketing Strategy: The SME under Globalization, Journal of International Marketing 8(2), 1233. Knight, G., and S. T. Cavusgil (1996). The Born Global Firm: A Challenge to Traditional Internationalization Theory, in Export Internationalizing Research-Enrichment and Challenges. Advances in International Marketing, Vol. 8. Eds. S. T. Cavusgil and T. K. Madsen. New York: JAI Press, 11 26. Know, Y. C., and M. Y. Hu (2000). Market Orientation among Small Korean Exporters, International Business Review 9(1), 6175. Kogut, B., and H. Singh (1988). The Effect of National Culture on the Choice of Entry Mode, Journal of International Business Studies 19, 411432.
505
Kohli, A. K., and B. J. Jaworski (1990). Market Orientation: The Construct, Research Propositions, and Managerial Implications, Journal of Marketing 54, 118. Kohli, A. K., B. J. Jaworski, and A. Kumar (1993). MARKOR: A Measure of Market Orientation, Journal of Marketing Research 30(4), 467477. Korhonen, H., R. Y. Luostarinen, and L. Welch (1996). Internationalization of SMEs: Inward-Outward Patterns and Government Policy, Management International Review 36(4), 315329. Kuemmerle, W. (2002). Home Base and Knowledge Management in International Ventures, Journal Business Venturing 17, 99122. Lado, A. A., N. Boyd, and P. Wright (1992). A Competency-Based Model of Sustainable Competitive Advantage: Toward a Conceptual Integration, Journal of Management 18(1), 7791. Larimo, J. (1991). Comportamiento de la Inversin Directa en el Exterior. Medicin y Factores Determinantes, Informacin Comercial Espaola 692, 145171. Leonidou, L. C. (1998). Factor Stimuling Export Business: An Empirical Investigation, Journal of Applied Business Research 14(2), 4369. Leonidou, L. C., and A. Adams-Florou (1999). Types and Sources of Export Information: Insights from small Business, International Small Business Journal 17(3), 3049. Li, L., D. Li, and T. Dalgic (2004). Internationalization Process of Small and Medium-sized Entreprises: Toward a Hybrid Model of Experiential learning and Planning, Management International Review 44(1), 93117. Liu, S. S., X. Luo, and Y. Shi (2002). Integrating Customer Orientation, Corporate Entrepreneurship, and Learning Orientation in Organizations-in-Transition: An Empirical Study, International Journal of Research in Marketing 19, 367382.
(2003). Market-Oriented Organizations in an Emerging Economy. A Study of Missing Links, Journal of Business Research 56, 481491. Lord, M. D., and A. L. Ranft (2000). Organizational Learning about New International Markets: Exploring the Internal Transfer of Local Market Knowledge, Journal of International Business Studies 31(4), 573590. Louter, P., C. Ouwerkerk, and B. A. Bakker (1991). An Inquiry into Successful Exporting, European Journal of Marketing 25(6), 723. Lumpkin, G. T., and G. G. Dess (1996). Enriching the Entrepreneurial Orientation ConstructA Reply to Entrepreneurial Orientation or Pioneer Advantage, Academy of Management 21(3), 605607. Luostarinen, R. (1980). Internationalization of the Firm, Acta Acadmica Series A: 30. The Helsinki School of Economics, Helsinki, Finland. Mackenzie, S. B., P. M. Podsakoff, and M. Ahearne (1998). Some Possible Antecedents and Consequences of In-Role and Extra-Role Salesperson Performance, Journal of Marketing 62, 8798. Madsen, T. K., and P. Servais (1997). The Internationalization of Born Globals: An Evolutionary Process? International Business Review 6(6), 561583. McAuley, A. (1999). Entrepreneurial Instant Exporters in the Scottish Arts and Crafts Sectors, Journal of International Marketing 7(4), 67 82. McDougall, P. P., and B. M. Oviatt (2000). International Entrepreneurship: The Intersection of Two Research Paths, Academy of Management Journal 43, 902908. McDougall, P. P., B. M. Oviatt, and R. C. Shrader (2003). A Comparison of International and Domestic New Ventures, Journal of International Entrepreneurship 1(1), 5982.
506
McDougall, P. P., S. Shane, and B. M. Oviatt (1994). Explaining the Formation of International New Ventures: The Limits of Theories from International Business Research, Journal of Business Venturing 9(6), 469487. McKinsey & Co (1993). Emerging Exporters: Australias High Value-Added Manufacturing Exporters. Melbourne: Australian Manufacturing Council. Menguc, B., and S. Auh (2006). Creating a Firm-Level Dynamic Capability through Capitalizing on Market Orientation and Innovativeness, Journal of the Academy of Marketing Science 34(1), 6373. Miles, M. P., and D. R. Arnold (1991). The Relationship between Market Orientation and Entrepreneurial Orientation, Entrepreneurship Theory and Practice 15(4), 4965. Miller, D. (1983). The Correlates of Entrepreneurship in Three Types of Firms, Management Science 29(7), 770791. Moran, P., and S. Ghoshal (1999). Markets, Firms, and the Process of Economic Development, Academy of Management Review 24, 390412. Narver, J. C., and S. F. Slater (1990). The Effect of a Market Orientation on Business Protability, Journal of Marketing 54, 2035. Ngansathil, W. (2001). Market Orientation and Business Performance: Empirical Evidence from Thailand, Ph.D. Dissertation. University of Melbourne. Oviatt, B. M., and P. P. McDougall (1994). Toward a Theory of International New Ventures, Journal of International Business Studies 25, 4564. Pauwels, P., and P. Matthyssens (1999). A Strategy Process Perspective on Export Withdrawal, Journal of International Marketing 7(3), 1035. Pelham, A. (1993). Mediating and Moderating Inuences on the Relationship between Market Orientation and
Performance, Ph.D. Dissertation. The Pennsylvania State University, U.M.I. (1997). Mediating Inuences on the Relationship between Market Orientation and Protability in Small Industrial Firms, Journal of Marketing Theory and Practice 5(2), 123. (2000). Market Orientation and the Other Potential Inuences on Performance in Small and Medium-Sized Manufacturing Firms, Journal of Small Business Management 38(1), 4866. Pitt, L., A. Caruana, and P. R. Berthon (1996). Market Orientation and Business Performance: Some European Evidence, International Marketing Review 13(1), 518. Reid, S. (1984). Information Acquisition and Export Entry Decisions in Small Firms, Journal of Business Research 12, 141157. Rialp, A., J. Rialp, and G. A. Knight (2005). The Phenomenon of Early Internationalizing Firms: What do We Know After a Decade (19932003) of Scientic Inquiry? International Business Review 14, 147166. Rogers, E. M. (1962). Diffusion of Innovations. New York: The Free Press. Root, F. (1987). Entry Strategies for International Markets. Lexington, MA: Lexington Books. Rose, G. M., and A. Shoham (2002). Export Performance and Market Orientation: Establishing an Empirical Link, Journal of Business Research 55, 217225. Ruekert, R. W. (1992). Developing a Market Orientation: An Organizational Strategy Perspective, International Journal of Research in Marketing 9, 225245. Schumpeter, J. (1934). The Theory of Economic Development. Cambridge, MA: Harvard Business Press. Shapiro, B. P. (1988). What the Hell Is Market Oriented? Harvard Business Review 66(6), 119125.
507
Sharma, D., and J. Johanson (1987). Technical Consultancy in Internationalization, International Marketing Review 4, 2029. Shoham, A. (1998). Export Performance: A Conceptualization and Empirical Assessment, Journal International Marketing 63, 5981. Siguaw, J. A., and A. Diamantopoulos (1995). Measuring Market Orientation: Some Evidence on Narver & Slaters Three-component Scale, Journal of Strategic Marketing 3, 7788. Simpson, C., and D. Kujawa (1974). The Export Decision Process: An Empirical Inquiry, Journal of International Business Studies 5(1), 107124. Sinkula, S. F. (1994). Market Information Processing and Organizational Learning, Journal of Marketing 58, 3545. Slater, S. F. (1996). The Challenge of Sustaining Competitive Advantage, Industrial Marketing Management 25, 7986. Slater, S. F., and J. C. Narver (1994). Does Competitive Environment Moderate the Market OrientationPerformance Relationship, Journal of Marketing 58(1), 4655. (1995). Market Orientation and the Learning Organization, Journal of Marketing 59, 6374. (1996). Competitive Strategy in the Market-Focused Business, Journal of Market Focused Management 1, 159174. (2000). Intelligence Generation and Superior Customer Value, Journal of the Academy of Marketing Science 28(1), 120127. Sunzook, F. (1978). How British Industry Exports, Marketing (UK) June, 2934. Trustrum, L. (1989). Marketing: Concept and Function, European Journal of Marketing 23(3), 4856. Tuominen, M., K. Mller, and A. Rajala (1997). Marketing Capability: A Nexus of Learning-Based Resources
and a Prerequisite for Market Orientation, in 26th European Marketing Academy (EMAC) Annual Conference Proceedings, Warwick, UK, May. Vol.1, 12201240. Varela, J. A., A. Gutirrez, and C. Antn (1998). La Cultura de Orientacin al Mercado & Otros Antecedentes Seleccionados del Rendimiento Empresarial. Un Contraste de Metodologas, in Proceedings of the Xth Encuentro de Profesores Universitarios de Marketing, Santander, Spain, September 2425, 135139. Verhees, F., and M. Meulenberg (2004). Market Orientation, Innovativeness, Product Innovation, and Performance in Small Firms, Journal of Small Business Management 42(2), 134 154. Vernon, R. (1966). International Investment and International Trade in the Product Cycle, Quarterly Journal of Economics 80, 190297. Repr., The Internationalization of the Firm. Eds. P. J. Buckley and P. Ghauri. London: Academic Press, 1993. Webster, F. E. (1992). The Changing Role of Marketing in the Corporation, Journal of Marketing 56, 117. Weerawardena, J., and A. OCass (2004). Exploring the Characteristics of the Market-Driven Firms and Antecedents to Sustained Competitive Advantage, Industrial Marketing Management 33, 419428. Weinstein, A. (1977). Foreign Investment by Service Firms: The Case of Multinationals Advertising Agencies, Journal of International Business Studies 8(1), 8391. Westhead, P., M. Wright, D. Ucbasaran, and F. Martin (2001). International Market Selection Strategies of Manufacturing and Service Firms. Entrepreneurs and Regional Development 13(1), 1747. Wiedersheim-Paul, F., H. Olson, and L. Welch (1978). Pre-export Activity: The First Step in Internationalization,
508
Journal of International Business Studies 9(1), 4758. Wind, Y., S. P. Douglas, and H. V. Perlmutter (1973). Guidelines for Developing International Marketing Strategies, Journal of Marketing 37, 1423. Yip, G. S., J. Gmez, and J. A. Monti (2000). The Role of the Internationalization Process in the Performance of Newly Internationalizing Firms, Journal of International Marketing 8(3), 1036.
Zahra, S. A., D. F. Jennings, and D. F. Kuratko (1999). The Antecedents and Consequences of Firm-Level Entrepreneurship: The State of the Field, Entrepreneurship Theory and Practice 24(2), 4565. Zahra, S. A., J. Hayton, and H. ONeill (2001). Fostering Entrepreneurship during International Expansion: Managing Key Challenges, European Management Journal 19, 359 369.
Overall Market Orientation Scale

Intelligence Generation G1 G2 G3 G4 G5 G6 G7 G8 G9 G10 G11 G12 G13 G14 We know our competition: we gather information about them on a regular basis. We obtain ideas to improve our products from our customers. We conduct frequent customer research to anticipate what products and services they will need in the future. Functional Managers are regularly informed about our actual and potential competitors. Market research insights are used for decision-making purposes. We contact periodically with customers to know their perception about the quality of our products and services. We often gather market data to apply them in the development of new products. There are information systems operating within the company to sense major industry changes. We are able to quickly detect changes in customer preferences. We encourage customers to make comments and even complaints about the companys offering, since that make us improve our job. We regularly analyze our competitors marketing programs. We frequently review the environmental changes effect on customers. We commonly measure the service level delivered to our customers. We constantly analyze to what extend the company is committed to meet our customers needs.
509
Intelligence Dissemination D1 D2 There are periodical encounters among the different areas to discuss about environmental and market trends. When something important happens to a customer or customer group, the company has access to this information on short notice. We try to make reports regarding competitive situation and future environmental trends available to the different departments in the company. When a department sense relevant issues related to competitors, it alerts quickly to other departments in the company Top management discuss regularly strengths, weaknesses, and competitors strategies. Customer and market success/failures are communicated to the other departments in the company. Salesforce share information with the company about competition strategies. There is a constant ow of opinions among areas to decide how to respond to competition strategies. Customer Satisfaction data are spread at all levels within the company. Market Response R1 R2 R3 R4 R5 R6 We use customer information to improve quality. In the process of new product development, we start from what is valuable for the customer. We sep the promises we make to our customers. The effort devoted to product development is reviewed to ensure it meets customer needs. Customer complaints are quickly answered. We are sensitive to how customer evaluates our products and services, so required modications in the case of negative perceptions are performed immediately. We try to achieve competitive advantages by understanding customer needs.
D3
D4 D5 D6 D7 D8 D9
R7
Source: lvarez, Santos, and Vzquez (2000).
510
Knowledge Acquisition Scale (Related to the Firms Major Exporting Market)

KA1 KA2 KA3 KA4 KA5 In your opinion, which is the level of knowledge that your company has regarding its foreign customers? In your opinion, which is the level of knowledge that your company has regarding its foreign environment? In your opinion, which is the level of knowledge that your company has regarding its foreign competitors? In your opinion, which is the level of knowledge regarding the institutional structure, norms, culture and language of that market? Which is the level of experience acquired in your major foreign market?
Source: own development.
Market Commitment Scale (Related to the Firms Major Exporting Market)

MC1 MC2 MC3 MC4 The structural changes taking place in my company due to its foreign market entry has been . . . Human resources devoted to internationalization training programs have been . . . The percentage of human resources committed to foreign market operations has been . . . In your company, in order to achieve its general objectives, the development of foreign market operations is considered . . .
Source: adapted from Yip, Gmez, and Monti (2000).
Foreign Market Performance Scale (Related to the Firms Major Exporting Market)
EXP TGRS PROF GRPROF NP Which is the approximate percentage of exporting sales of your major foreign market over the total sales of the company within the last three years? Which is the average sales growing rate that your company displays in its major foreign market within the last three years? How do you consider the percentage of net prots obtained in the rms export sales? Setting the last three years as horizon of time, how has been the average growth of your export sales net prots? Which is the success rate of new product/service development of your company in its major foreign market?
Source: adapted from Rose and Shoham (2002).
511

J 1540-627X 2008 00253 X

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

J 1540-627X 2008 00253 X

Uploaded by

Copyright:

Available Formats

Journal of Small Business Management 2008 46(4), pp.

Market Orientation and Internationalization in Small and Medium-Sized Enterprises

ARMARIO, RUIZ, AND ARMARIO

JOURNAL OF SMALL BUSINESS MANAGEMENT

ARMARIO, RUIZ, AND ARMARIO

JOURNAL OF SMALL BUSINESS MANAGEMENT

ARMARIO, RUIZ, AND ARMARIO

JOURNAL OF SMALL BUSINESS MANAGEMENT

Research Objectives and Hypotheses

ARMARIO, RUIZ, AND ARMARIO

JOURNAL OF SMALL BUSINESS MANAGEMENT

ARMARIO, RUIZ, AND ARMARIO

Figure 1 Proposed Model

JOURNAL OF SMALL BUSINESS MANAGEMENT

ARMARIO, RUIZ, AND ARMARIO

JOURNAL OF SMALL BUSINESS MANAGEMENT

ARMARIO, RUIZ, AND ARMARIO

Table 1 Measurement and Structural Model

0.86 0.83 0.83 0.72 0.63

0.75 0.69 0.69 0.52 0.40 0.42

0.88 0.91 0.87 0.78 0.85

0.77 0.83 0.76 0.61 0.73 0.44

0.89 0.86 0.89 0.80

0.78 0.74 0.79 0.63 0.73

0.61 0.42 0.80 0.81

0.37 0.18 0.65 0.65

JOURNAL OF SMALL BUSINESS MANAGEMENT

.03 .00 .07 .00 .04 .04

ARMARIO, RUIZ, AND ARMARIO

Table 3 Direct, Indirect, and Total Effects

Discussion, Limitations, and Further Research

JOURNAL OF SMALL BUSINESS MANAGEMENT

Table 4 Alternative Model Comparison

ARMARIO, RUIZ, AND ARMARIO

JOURNAL OF SMALL BUSINESS MANAGEMENT

ARMARIO, RUIZ, AND ARMARIO

JOURNAL OF SMALL BUSINESS MANAGEMENT

ARMARIO, RUIZ, AND ARMARIO

JOURNAL OF SMALL BUSINESS MANAGEMENT

ARMARIO, RUIZ, AND ARMARIO

JOURNAL OF SMALL BUSINESS MANAGEMENT

Overall Market Orientation Scale

ARMARIO, RUIZ, AND ARMARIO

Source: lvarez, Santos, and Vzquez (2000).

JOURNAL OF SMALL BUSINESS MANAGEMENT

Knowledge Acquisition Scale (Related to the Firms Major Exporting Market)

Source: own development.

Market Commitment Scale (Related to the Firms Major Exporting Market)

Source: adapted from Yip, Gmez, and Monti (2000).

Source: adapted from Rose and Shoham (2002).

ARMARIO, RUIZ, AND ARMARIO

You might also like