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Strategic
Strategic capabilities in capabilities in
exporting: an examination of the exporting
performance of Mexican firms
1643
Carlos M. Rodriguez
College of Business, Delaware State University, Dover, Delaware, USA
Jorge A. Wise
Department of Business, Tecnológico de Monterrey, Cuernavaca, Mexico, and
Carlos Ruy Martinez
EGADE Business School, Tecnológico de Monterrey (ITESM), Monterrey, Mexico

Abstract
Purpose – This study aims to examine in the context of high involvement exporting Mexican firms a
model which suggests that a blend of absorptive and dynamic capabilities is necessary to build and
sustain their competitiveness in international markets.
Design/methodology/approach – Data were collected from 119 high involvement Mexican
exporting firms through informants. Formative and reflective constructs were validated through
MIMIC models and confirmatory factor analysis using LISREL. The theoretical model was tested
using partial least squares (PLS).
Findings – Results suggest that high involvement Mexican exporting firms’ capacity to adapt
through product design, technology management, manufacturing processes, and cooperative
relationships impacts their innovation and market expansion-adaptation capabilities. Nurturing an
entrepreneurship orientation is critical to build flexibility, transfer innovation to markets, and drive
export performance. Ultimately, performance is determined by the firms’ ability to design and develop
products through the adoption of improved technologies, a deep understanding of international
demands, and an ability to refocus exporting strategies as changes in competitive contexts require.
Research limitations/implications – The design of exporting capabilities in this study only
applies to high involvement exporting firms.
Practical implications – High involvement exporting firms sustain growth through the
development of exploration (learning), exploitation (expansion-adaptation), and dynamic
(innovation, entrepreneurship) capabilities as determinant of performance.
Originality/value – This is the first model that tests relationships among learning, manufacturing
flexibility, and market expansion-adaptation and dynamic capabilities such as innovation and
entrepreneurship and their impact on performance in high involvement Mexican exporting firms.
Keywords Exporting, Capabilities, Learning, Innovation, Mexico, Partial least squares, Exports
Paper type Research paper

1. Introduction
Several theorists view the internationalization process as a progressive sequence of
operations and firm’s behavior at each stage (Forsgren, 2002; Johanson and Vahlne,
1990). Firms accumulate resources, manage increasing levels of risk, and minimize Management Decision
Vol. 51 No. 8, 2013
pp. 1643-1663
q Emerald Group Publishing Limited
The authors acknowledge the support from the Center for the Study of Innovation Management 0025-1747
CSIM, College of Business at Delaware State University, USA. DOI 10.1108/MD-10-2012-0766
MD transactions costs as they learn, acquire experiential knowledge, and increase their
international involvement. Internationalization focuses on resource exploitation
51,8 because the decision to enter foreign markets is driven by the interest to use,
strength, or develop an advantage (Madhok, 1997). Even though this theory applies
well to firms that adapt known technologies to foreign markets (Yip et al., 2000) it is
insufficient to explain the behavior of more entrepreneurial firms.
1644 Recently, international entrepreneurship theory has been proposed to overcome the
limitations of internationalization theories (Etemad and Wright, 2003; Knight and
Cavusgil, 2004; Mtigwe, 2006). It sustains that value creation and international
opportunity seeking result from the adoption of innovative, proactive, and risk-seeking
behavior (McDougall and Oviatt, 2000). It argues that entrepreneurial firms have the
capability to explore and exploit international opportunities as they acquire market
knowledge, design learning mechanisms (Cohen and Levinthal, 1990), and use their
network of relationships to explore modes of entry (Coviello and Munro, 1995).
Entrepreneurial firms sustain their competitive advantage in continuous innovation in
environments characterized by short life cycles and rapid technological changes (Zahra
and Garvis, 2000). Consequently, entrepreneurship, innovation, and
internationalization are genuinely intertwined along the firm’s expansion path.
International entrepreneurial firms choose exporting as their most preferred form of
foreign market entry (Khemakhem, 2010; Mtigwe, 2006; Westhead, 2008). As these
firms become involved in exporting, they develop capabilities such as marketing
experience and R&D (Atuahene-Gima, 1995), customer relationships and supply chain
management (Piercy et al., 1998), and the ability to develop new products (Cavusgil and
Zou, 1994). The way exporters integrate these capabilities is the source of superior
performance (Ibeh and Wheeler, 2005). Therefore, we may conclude that the
organizational capability perspective explains entrepreneurial firms’ international
entry sustainability better than traditional internationalization theory and the
transaction cost perspective that supports it.
In spite of its relevancy, research has been limited (Knudsen and Madsen, 2002) in
explaining export performance from a capabilities perspective. In this study, we test, in
the context of experienced Mexican exporting firms a model of export competitiveness
previously developed by Rodriguez (2009) which suggests that high involvement
exporting firms require a blend of absorptive and dynamic capabilities to build their
international competitiveness. Dynamic capability and resource-based view is the
theoretical framework adopted to conceptualize the proposed model.

2. Capabilities in exporting
For exporting strategies to be sustainable over time, they require the development of
different types of capabilities (Knight and Cavusgil, 2004): dynamic capabilities (Kogut
and Zander, 1992) with an evolving nature (Luo, 2000) and absorptive capabilities
(Piercy et al., 1998). These capabilities develop at different rates and follow different
evolutionary paths (Zahra and Nielsen, 2002), Dynamic capabilities are the firm’s
ability to integrate, build, and reconfigure internal and external competencies to
address rapidly changing environments (Teece et al., 1997) are difficult to imitate, and
become a source of sustainable competitive advantage. These competencies include
managerial and organizational processes that support innovation and entrepreneurial
capabilities that reshape and renew over time (Eisenhardt and Martin, 2000). Overall,
dynamic capabilities create value by co-alignment of resources and processes into new
value-creating and reconfiguration strategies as exporting firms interact with Strategic
international markets (Knudsen and Madsen, 2002).
Absorptive capabilities entail the set of organizational routines and processes by
capabilities in
which firms acquire, transform, and exploit knowledge to produce dynamic exporting
capabilities (Zahra and George, 2002). They represent the organization’s ability to
identify the value of new information, assimilate it, and apply it to commercial ends
(Cohen and Levinthal, 1990) as they respond strategically to foreign markets (Kogut 1645
and Zander, 1992).
Absorptive capabilities require learning to assimilate knowledge and problem
solving skills to implement the firm’s innovation efforts. Zahra and George (2002)
distinguish between potential and realized absorptive capabilities. Potential absorptive
capability entails the firm’s ability to acquire external knowledge while realized
absorptive capacity leverages existing knowledge. In this study, potential absorptive
encompasses technology, market, and social learning while realized absorptive is
embedded in manufacturing flexibility and marketing expansion and adaptation
capabilities. This framework is consistent with the exploration-exploitation
perspective by March (1991) and Madhok (1997) which suggests that exploration
capabilities are derived from organizational learning, whereas exploitation capabilities
are derived primarily from technological and market processes. This study focuses on
the impact of innovation and entrepreneurship orientation, as dynamic capabilities on
the firm’s ability to integrate, build, and reconfigure its absorptive capabilities. It
follows a discussion of how these capabilities interrelate and the theoretical basis that
supports the relationships proposed in the model shown in Figure 1.

3. Learning capabilities in exporting

Learning is the firm’s capability to develop and maintain competencies based on
experiences (DiBella et al., 1996) and is expressed as action-outcome relationships
which include the learning activity and its impact. Exporters with a learning
orientation have the capability to identify opportunities and adopt new technologies.
For example, new product success in exporting markets is determined by the firms’
learning about customers and competitors (Li et al., 1999). High involvement exporters
build a substantial base of knowledge and experience to support organizational

Figure 1.
Theoretical model
MD capabilities and performance in international markets (Knight and Cavusgil, 2004;
Weerawardena, 2003). Therefore, in order to assess product-market opportunities, an
51,8 options identification capability is essential. Learning as a potential absorptive
capability (Eriksson and Chetty, 2003) supports opportunity identification and makes
the firm receptive to integrate external knowledge (Lane and Lubatkin, 1998).
The sources of learning are technology, market, and social (Yeoh, 2004). Technology
1646 learning provides knowledge that supports the development of innovations. It enhances
company’s performance through R&D capabilities (Lefebvre et al., 1998), design of
differentiated products, and speed to the market (Zahra et al., 2000). Market learning
determines the firm’s preparedness to sense market and customer changes and
anticipates responses (Weerawardena, 2003). Social learning are processes to develop
and maintain collaborative relationships with customers, channels, and suppliers.
Export development is associated to high levels of cooperation between exporters and
importers, high levels of trust, and communication sufficiency (Leonidou and Kaleka,
1998). More importantly, social ties promotes awareness and exploration of exporting
opportunities when high uncertainty exists in international expansion (Yeoh, 2004).
Organizations learn from external (exploration) and internal (exploitation) sources
(March, 1991). Thereby, success in international expansion is possible when these
sources of learning: technology, markets, and social are coupled with superior
exploitation capabilities (Luo, 2000). One such capability is manufacturing flexibility.

4. Manufacturing flexibility capability

Manufacturing flexibility is the ability to manage production resources and
infrastructure to meet customer demands (Chen et al., 1992) and is essential in
responding to uncertainty from international markets with minimum negative impact
on time, cost, and performance (Upton, 1994). Exporting firms must develop
manufacturing flexibility to face a changing demand, need for product differentiation,
and development of new products. Mechling et al. (1995) showed that there is a positive
association between the learning of advanced manufacturing technologies and the
ability to develop unique products. Clearly, learning about proprietary equipment and
processes contributes to the firm’s manufacturing performance (Schoenecker and
Swanson, 2002). As such, technology learning, an exploration absorptive capacity,
determines the ability to produce a variety of products, modify product designs, and
operate at different levels of manufacturing output. Therefore:
H1. Technology learning has a direct positive effect on manufacturing flexibility
capability in high involvement Mexican exporting firms.

5. Innovation capability
Innovation is an essential capability of successful exporting. Bleaney and Wakelin
(2002) found that innovative activity promotes exports significantly in entrepreneurial
firms, whereas, exporting in non-innovating firms is only associated with lower unit
labor costs. Capabilities such as customer and supplier involvement, modular design,
team organization, and technology usage distinguish innovation in new product
development in high versus low intensity exporters (Lim et al., 2003). In fact, active
involvement in product and process development distinguishes firms with high export
orientation (Bagchi-Sen, 1999). Within these firms, the complexity and tacitness of
technology knowledge are determinant to protect product improvements from
imitation (McEvily and Chakravarthy, 2002). Clearly, innovation as it builds export
readiness is nurtured by technology knowledge and manufacturing. The following Strategic
hypotheses are stated:
capabilities in
H2. Technology learning has a direct positive effect on innovation capability in exporting
high involvement Mexican exporting firms.
H3. Manufacturing flexibility capability has a direct positive effect on innovation
capability in high involvement Mexican exporting firms. 1647
Innovation as the ability to design new products and develop unique features must be
nurtured by a deep understanding of markets and consumers. Exporting firms with
access to knowledge abroad and a market focused capability increase their innovation
productivity (Salomon, 2006) and innovation intensity in products and processes
(Weerawardena, 2003). For this, the firm’s innovation requires high levels of exploration
through variance-seeking market learning processes (McGrath, 2001). Therefore:
H4. Marketing learning has a direct positive effect on innovation capability in
high involvement Mexican exporting firms.

6. Market expansion-adaptation capability

Entrepreneurship exporters are externally oriented and consistently follow new market
opportunities. They nurture a market orientation and develop marketing capabilities to
adapt to the requirements of export markets (Morgan et al., 2003) while influencing
positively export sales and profits (Rose and Shoham, 2002). Therefore, firms must
demonstrate market expansion capabilities for exporting to succeed. In this study, market
expansion capability is defined as the ability to configure and deploy marketing resources
among different export markets to achieve performance. Because organizations integrate
and reconfigure capabilities to match requirements from the environment (Teece et al.,
1997), market expansion builds on the firm’s adaptation capabilities (Yang et al., 1992).
Adaptation requires organizations to initiate strategic change which alters their market
position through adding new products or eliminating markets from their portfolios as
response to sensing changes in the competitive arena. Hence:
H5. Marketing learning has a direct positive effect on market expansion-adaptation
capability in high involvement Mexican exporting firms.
Management of the relationships with international customers impacts export
performance (Leonidou and Kaleka, 1998). Harmonious relationships are characterized
by greater dependence, trust, and cooperation (Leonidou et al., 2002). Thus, we expect
that social learning, as the process that builds collaborative relationships, will facilitate
adaptation to complex international environments (Nair, 2001). Therefore:
H6. Social learning has a direct positive effect on market expansion-adaptation
capability in high involvement Mexican exporting firms.
Bell et al. (2004) suggest that product and process innovation becomes a strong
stimulus to overseas expansion and firms’ internationalization processes. Innovation
shapes product offering and allows for progressive adaptation to market demands. For
this, new product development through innovation capabilities must exist to support
expansion and export involvement (Lim et al., 2003). In consequence:
MD H7. Innovation capability has a direct positive effect on market
expansion-adaptation capability in high involvement Mexican exporting firms.
51,8
7. Entrepreneurship orientation
Entrepreneurship is the ability of the firm to use capabilities to exploit external
markets and envision opportunities (Chandler and Hanks, 1994). An entrepreneurship
1648 orientation is characterized by a risk taking behavior, proactiveness, and
innovativeness (Burton and Schlegelmilch, 1987). Entrepreneurship predicts the
allocation of firms’ resources to market heterogeneity to enhance customer value
(Barney, 2001). It constitutes a capability that allows initiating change, pursuing new
business ventures, and recognizing international opportunities.
In allocating resources, exporting firms need to engage in careful production
planning because of the need to build speed and flexibility in response to customer
demand (DeToni and Nassimbeni, 2001). These firms have the ability to pursue new
technologies and implement advanced manufacturing techniques such as just-in-time,
concurrent engineering, total quality management to support their innovation efforts
(Mechling et al., 1995). Hence:
H8. Entrepreneurship orientation has a direct positive effect on manufacturing
flexibility capability in high involvement Mexican exporting firms.
An entrepreneurship orientation fosters proactive and explorative behaviors that
promote innovation (Bhaskaran, 2006). Moreover, a high market and entrepreneurship
orientation combination is superior in generating product innovation (Atuahene-Gima
and Ko, 2001). Within firms, entrepreneurial strategies that facilitate information
processing and decision making are critical to product and market innovation. As such:
H9. Entrepreneurship orientation has a direct positive effect on innovation
capability in high involvement Mexican exporting firms.
Firms that develop an entrepreneurship orientation foster risk taking and the
exploration of new opportunities. This orientation requires the capability to adapt to
the development of markets (Morris and Paul, 1987) and alertness to resize the firm’s
future ability to compete (Barney et al., 2001). Therefore:
H10. Entrepreneurship orientation has a direct positive effect on market
expansion-adaptation capability in high involvement Mexican exporting
firms.

8. Export performance
Dynamic capabilities theory suggests that export performance should address long
run benefits of the firm’s absorptive capacity and informational architecture (Knudsen
and Madsen, 2002). The firm’s absorptive capacity builds its knowledge base,
promotes innovation productivity, and facilitates entering key international markets
(Salomon, 2006) but it is the entrepreneurial orientation that explains the observed
patterns of the firm’s international growth (Helfat et al., 2007) by transferring
innovation output to international markets. As such:
H11. Entrepreneurship orientation has a direct positive effect on export
performance in high involvement Mexican exporting firms.
The development of manufacturing capabilities such as quality, delivery Strategic
speed,dependability, flexibility and their impact on costs determines performance
and market share (White, 1996). Building R&D, encouraging the acquisition of
capabilities in
technology, and maintaining productivity have a positive impact on the firm’s exporting
propensity to export (Yang et al., 2004). Clearly, the accumulation of technological
knowledge from external sources or collaboration is one determinant of export
performance (Lefebvre et al., 1998). As a result: 1649
H12. Manufacturing flexibility capability has a direct positive effect on export
performance in high involvement Mexican exporting firms.
The propensity of manufacturing firms to export is driven by their ability to innovate
products. The management of product design, product and process innovation,
inventiveness, and creativity fuel success into their internationalization (Nassimbeni,
2001). Technology investment supports the firm’s export intensity and product diversity
with an impact on profitability, market share, and growth (Dhanaraj and Beamish, 2003)
while export sales is fueled by R&D expenditures (Ito and Pucik, 1993). Then:
H13. Innovation capability has a direct positive effect on export performance in
high involvement Mexican exporting firms.
The choice of a particular export marketing expansion strategy has an impact on the
firm’s performance. Exporting firms with a diversification strategy outperform those
who follow a concentric diversification or concentration strategy in export growth and
profitability (Lee and Yang, 1990). Thus:
H14. Market expansion-adaptation capability has a direct positive impact on
export performance in high involvement Mexican exporting firms.

9. Methodology
9.1 Operational measurement of constructs
Technology learning was assessed through four-item adapted from Zahra et al. (2000).
Market learning was assessed through four items (action-outcome relationships) based
on Yeoh (2004), Day (2002), and Li et al. (1999). Social learning was assessed through
four-item scale adapted from Yeoh (2004) and manufacture flexibility through a
three-item scale (Zhang et al., 2003). Innovation was assessed through three-item scale
adapted from Tatikonda and Montoya-Weiss (2001) and Moorman and Slotegraaf
(1999). Market expansion-adaptation capability was measured through three-item scale
adapted from Li (1999), Dess et al. (1997), and Yang et al. (1992). Entrepreneurship
orientation was assessed through a three-item scale selected from the entrepreneurship
scale developed by Covin and Slevin (1986). Finally, export performance was assessed
through three formative indicators selected from the EXPERF scale (Zou et al., 1998)
which managers often trade-off in assessing export performance (Diamantopoulos,
1999). All the items are included in Table I.

9.2 Mexican firms as sample framework

Mexican firms are an appropriate setting because of their increasing participation and
commitment to exports in last years. In the period 1990-2011, Mexico’s international trade
(exports and imports) have increased from US$84.3 to US$710.4 billion (742.7 percent).
Particularly, exports in Mexico have grown 758.5 percent from US$40.7 to US$349.4 billion
(INEGI, 2012). In addition, Mexico has increased its international trade participation
MD
VIF variance
51,8 Standard inflation
Constructs Mean deviation factor

Technology learning (a ¼ 0.87) (r ¼ 0.91) *a

Adapt manufacturing processes to satisfy local market
1650 specifications (TL1) 5.04 2.00 NA
Design new production processes for rapid prototyping (TL2) 4.29 2.07 NA
Identify new technologies to reduce production costs (TL3) 4.44 1.98 NA
Coordinate R&D activities with other organizational units for
timely market introductions (TL4) 4.58 1.92 NA
Market learning (a ¼ 0.89) (r ¼ 0.92) *a
Design or adapt products to satisfy exporting markets’ needs
(ML1) 4.84 1.89 NA * *
Identify and track customer needs to forecast potential market
sales (ML2) 4.95 1.80 NA
Identify/design and manage distribution channels to have
adequate presence in exporting markets (ML3) 4.90 1.69 NA
Obtain information about competitors to shape firm’s exporting
strategy (ML4) 4.85 1.71 NA
Social learning (a ¼ 0.88) (r ¼ 0.92) *a
Identify and connect with foreign buyers to facilitate
communication (SL1) 4.98 1.80 NA
Manage cooperative relationships with suppliers to assure timely
outsourcing (SL2) 5.25 1.72 NA
Build collaborative relationships with distributors to sustain and
promote exporting sales (SL3) 4.99 1.79 NA
Develop trust with business partners to assist negotiations (SL4) 5.07 1.79 NA
Manufacturing flexibility capability a
We can operate efficiently at different levels of manufacturing
output (MF1) 5.31 1.62 1.61
We can produce a wide variety of products in our plant(s) (MF2) 5.64 1.42 1.72
We can modify our product designs to fit customers’ demands
(MF3) 5.77 1.41 1.95
a
Innovation capability
Our organization invests resources in the development and
design of new products/services (IN1) 5.65 1.36 3.39
Our organization has the ability to formulate and develop new
products (IN2) 5.90 1.24 2.71
Our organization has the ability to adopt new or improve
existing processing technologies or methods (IN3) 5.73 1.22 2.87
a
Market expansion-adaptation capability
Our organization has the ability to make appropriate changes in
its exporting strategy based upon feedback from the market
place (ME1) 5.58 1.41 2.27
Table I. Our organization has the capability to offer a variety of products/
Measurement items for services to satisfy international demand (ME2) 5.69 1.39 2.38
constructs: mean, Our firm has designed mechanisms to collect information about
standard deviations, and our competitors’ products and strategies (ME3) 5.31 1.51 1.60
variance inflation factors (continued)
 VIF variance Strategic
Standard inflation capabilities in
Constructs Mean deviation factor
exporting
Entrepreneurship orientation a
In the past five years: . . . my firm has marketed no new products/
services – – – – my firm has marketed many new products/
services (EO1) 5.17 1.67 1.80 1651
In dealing with its competitors, my firm: . . . typically responds to
actions which competitors initiate – – – – typically initiates
actions to which competitors respond (EO2) 4.89 1.42 1.99
Top managers of my firm believe: . . . it is best to explore new
opportunities cautiously via “one step at a time” adjustments
– – – – hold and wide-ranging changes are necessary to achieve
the firm’s objectives (EO3) 3.98 1.39 1.33
Export performance
Please indicate the extent to which your firm achieved the
following exporting objectives in relation to top management’s
expectations:
Export profits (XPRF) 4.46 1.34 2.12
Sales growth (SAG) 4.25 1.45 2.31
Enter key markets abroad (KMA) 4.58 1.61 1.89
Notes: a ¼ Items used with seven point Likert-type scale; NA ¼ not applicable; *a ¼ Cronbach’s
alpha; r ¼ Dillon-Goldstein’s rho calculated for constructs with reflective indicators Table I.

stimulated by more than 49 international trade agreements and treaties in the World (SE,
2012). Therefore, Mexican firms have learned, build, and developed exporting capabilities
in the last two decades (Alvarez, 2011) to support this continuous growth.

9.3 Sample
This study adopted a non-probability sampling design of Mexican firms. The use of
non-probability sample is acceptable for international market research (Reynolds et al.,
2003) and is common in countries like Mexico (Tanner et al., 2008; Ablanedo-Rosas
et al., 2010). Our sample was selected from a government database SIEM1[1]. This
database had 983 firms from Nuevo Leon, a Mexican Northern State. Initially, firms
were contacted by phone; only 362 telephone numbers were operational and 154 firms
accepted to participate in the study. Follow-up telephone calls were made in a period of
12 months with a final usable sample of 119.
These firms have a median annual sales of $10,000,000, export to an average of 21
countries in the last 20 years, and 40.1 percent of their sales derived from exports; 50
percent export less than 20 products, 25.0 percent export 26 to 50, and 25.0 percent export
more than a 70. The respondents consisted of managers with an average age of 37 years,
6 years of experience as part of the TMT, and 9 years in exporting. These informants are
CEO and VP for International Operations (15.6 percent), Directors of Exporting and
Managers of International Operations (25.5 percent), Marketing Directors and Marketing
Managers (40.4 percent), International Marketing and Sales Managers (15.1 percent), and
Business Development Managers (3.4 percent). The results of this study must be
interpreted in light of these demographic and organizational characteristics.
MD Due to the estimation procedure in PLS, only a portion of the model is assessed at
any one time. The part of the model that requires the largest multiple regression
51,8 becomes important for the estimation of sample size (Chin and Newsted, 1999). The
model shown in Figure 1 has export performance as the dependent LV with four LVs
(entrepreneurship orientation, manufacturing flexibility capability, innovation
capability, and market expansion-adaptation capability). With a medium effect size
1652 as defined by Cohen (1998), the minimum sample size is 84 to obtain a power of 0.80.
Thus, with a sample size of 119 the power in this study is over 80 percent (average
loadings l ¼ 0.80 and f ¼ 0.36).

10. Statistical treatment and analysis

The distributional properties of the data were examined and bootstrapping was
implemented to provide less biased estimates and robust standard errors. Cronbach’s
alphas were calculated for constructs with reflective indicators and were above the 0.70
as recommended by Nunnally (1978). Similarly, Dillon-Goldstein’s rho coefficients were
above the recommended minimum 0.70. When constructs with formative indicators
show high levels of multicolinearity, the influence of each indicator on the construct
cannot be distinctly determined causing estimation difficulties (Diamantopoulos and
Winklhofer, 2001). All VIFs are lower than 3.59 (below the accepted cut-off value
VIF , 10). Table I illustrates the mean and standard deviation for the measurement
items and VIFs; all indicate good external validity and no multicolinearity.

10.1 Validity of constructs with formative indicators

Several of the constructs in the theoretical model are measured as formative first-order;
therefore, external validity needs to be assessed. Diamantopoulos and Winklhofer
(2001) suggest using a MIMIC model in order to test for validity of formative scales.
This requires selecting a reflective indicator that summarizes the essence of the
construct to achieve identification and minimize error estimates. Following MacKenzie
et al. (2005), two reflective indicators and their formative ones were used to fit a MIMIC
model for each construct: manufacture flexibility, innovation, market
expansion-adaptation, entrepreneurship orientation, and export performance. Table II
illustrates the model fit, p-values, and RMSEA for each MIMIC model.

10.2 Discriminant validity

To assess discriminant validity, all constructs’ AVEs (average variance extracted)
showed to be greater than their squared correlation with all other constructs (see
Table I). Therefore, all indicators loaded on their respective constructs as theory
suggests. In order to test for common method variance a confirmatory factor analysis
approach to Harman’s one factor controlling for the effects of an unmeasured latent
methods factor as suggested by Podsakoff et al. (2003) was applied to constructs with
reflective indicators. A one-factor model did not fit (x2 ¼ 249.44, 54 degrees of freedom
(df), p ¼ 0.000, goodness of fit index (GFI) ¼ 0.74, and RMSEA ¼ 0.18) and a
comparison of the standardized parameter estimates (loadings) when common method
variance was and was not controlled for showed that the direction and significance of
the structural parameters were not affected. Therefore, common method variance does
not cause a problem.
 Strategic
Chi-square DF Normed fit Goodness of fit index
Constructs p-value index (NFI) (GFI) et RMSEA capabilities in
Manufacturing flexibility capability
exporting
We can vary aggregate
production output from one
period to the next
We can easily change the
4.17 0.98 0.99 0.09 1653
production volume of a
manufacturing process 2
0.12
Innovation capability
We can develop unique features
to differentiate our products 0.13 1.00 1.00 0.00
Extent to which your firm
improve international
competitiveness 2
0.93
Market expansion-adaptation
Our firm penetrates new market
segments within existing
international markets 0.89 1.00 1.00 0.00
Extent to which your firm
achieves sales volume 2
0.64
Entrepreneurship capability
Management actively seeks
innovative ideas 0.20 1.00 1.00 0.00
Within the organization,
unconventional approaches are
encouraged and rewarded 2
0.90
Export performance
Extent to which your firm
achieve export success 0.65 1.00 1.00 0.00
Our organization penetrates new Table II.
market segments within existing Results of MIMIC models
international markets 2 for constructs with
0.72 formative indicators

10.3 Testing the final model

The final model was estimated using Partial Least Squares Path Modeling, PLS-PM and
structural relationships and parameter estimates were obtained using PLS regression.
PLS-PM accounts for variances at the observed level, is prediction oriented, and pursues
high prediction accuracy. PLS makes minimum demands on measurement scales,
multicolinearity, distribution of residuals, and allows for inclusion of reflective and
formative indicators as in the proposed model. The overall goodness of fit index GOF for
the measurement model is 0.976 while GOF for the structural model is 0.869. AVE
(communalities) indicates the proportion of variance of indicators reproduced by their
latent variables and is indicator of the quality of the measurement model. The AVE range
is 0.525 to 0.757. Thus, validity of indicators in predicting their constructs is adequate.
MD The coefficient of determination r 2 measures the percentage of variance in each
endogenous construct explained by their individual predictors and therefore is a
51,8 measure of the explanatory power; manufacturing flexibility (0.214), innovation (0.528),
market expansion-adaptation (0.328), and export performance (0.221). These
coefficients are considered moderate (Chin, 1998) and innovation and market
expansion-adaptation are the constructs best explained in the model.
1654 Redundancy index measures the quality of the structural model for each
endogenous construct taking into account the measurement model. This model
specification explains 11.2 percent of the variance in manufacturing flexibility, 39.4
percent in innovation, 22.4 percent in market expansion adaptation, and 14.6 percent in
export performance. These redundancies show acceptable levels because each latent
variable is explained by only a few exogenous latent variables (Henseler et al., 2009).
From the redundancies one can deduce the VIPs which measure the importance of each
explanatory variable in predicting their respective exogenous constructs. The VIPs for
all independent variables with the exception of manufacture flexibility (0.616 when
predicting export performance) are within the range from 0.813 to 1.152 above the
minimum cutting point of 0.8 (Wold et al., 2001) and show a large predictive relevance.
The direct causal effect from technology learning to manufacturing flexibility is
0.271. Thus, hypothesis H1 is accepted; managers perceive a positive relationship
between technology learning and manufacturing flexibility capability in exporting
firms. Technology learning impacts innovation capability with a direct effect of 0.230;
thus H2 is accepted. The direct effect from manufacturing flexibility to innovation
capability is 0.226; thus, there is a positive relationship between manufacturing
flexibility capability and innovation capability and H3 is accepted. The direct effect of
market learning on innovation capability is 0.215; thus, H4 is accepted. As
hypothesized, market-learning impacts marketing expansion capability in 0.186 and
H5 is accepted. Social learning has a direct impact 0.192 on market
expansion-adaptation capability and H6 is accepted. The direct effect of innovation
capability on market expansion adaptation is 0.178 and H7 is accepted. The direct
effect from entrepreneurship orientation to manufacturing flexibility is 0.265 and thus
H8 is accepted; 0.226 to innovation capability and H9 is accepted; 0.144 to market
expansion-adaptation capability and H10 is accepted. Finally, export performance is
determined by entrepreneurship orientation (0.150), manufacture flexibility capability
(0.109), innovation capability (0.176), and market expansion-adaptation capability
(0.182); thus H11, H12, H13, and H14 are accepted.
In evaluating the total impact of latent constructs over exogenous variables, total
effects (direct and indirect) for critical relationships in the model were calculated.
Technology learning has a total effect of 0.291 on innovation, which suggest the direct
impact of learning, and indirect effect through manufacturing flexibility capability.
Entrepreneurship orientation has a total effect of 0.286 on innovation, which includes
the effect of entrepreneurship through manufacturing flexibility. It is clear the impact
of manufacturing capabilities on innovation as nurtured by technology learning and
the firm’s entrepreneurship orientation.
Market learning has a total effect of 0.224 on market expansion adaptation which
suggests that as learning about markets accumulates so is the capability to expand
and adapt. Learning about markets allows for firm’s market expansion through the
development of innovation resources and value added output. The total impact of
entrepreneurship orientation on export performance is 0.265. Several paths through
manufacture, innovation and market expansion abilities create this effect. Finally,
the total effect of innovation capability on export performance is 0.208 suggesting Strategic
that the capability to create products and processes generate export value through
the firm’s expansion and adaptation abilities. The complete estimated model is
capabilities in
shown in Figure 2. exporting
11. Discussion and managerial implications
The model originally proposed by Rodriguez (2009) and initially tested with American 1655
exporting firms is now extended and validated in a sample of high involvement
Mexican exporting firms. The findings show strong support for all the hypotheses
considered. Overall, the model suggests that high involvement exporting firms require
a blend of absorptive and higher-order dynamic capabilities to develop their
international competitiveness. Firstly, firms must build their technology, market, and
social knowledge bases and create learning processes to operate at different production
levels, produce a variety of products, and modify designs as demanded by markets.
The firm’s ability to design products, identify and track customer needs, and manage
international distribution channels is critical for the adoption of new technologies and
methods that create value through innovation. Building meaningful and trustable
relationships with suppliers, distributors, and foreign buyers increase the ability to
adjust the exporting strategy as the international marketplace demands. All these
findings are consistent with Lefebvre et al. (1998) conclusion that emphasis on R&D,
product improvement, and collaboration strategies are characteristic of successful
exporters. Also confirms Leonidou and Kaleka (1998) conclusion that strong
exporter-importer relationships are critical to high involvement in international
markets and Li et al. (1999) suggestion that exporting firms should learn about markets
to enhance success with new products.

Figure 2.
Final model estimation
MD Second, entrepreneurship orientation is a driving and regulatory capability to align
51,8 and realign strategic abilities: manufacture, innovation, and market expansion in
order to transfer new products and technologies to international markets. To this
purpose, entrepreneurship as a dynamic capability shapes the firm’s strategic
posture by providing flexibility to adjust and monitor internal capabilities. This
finding extends Barney’s (2001) proposition that entrepreneurship predicts firms’
1656 resource allocation to market heterogeneity by suggesting different paths to export
performance.
Third, innovation intertwines manufacture and technology capabilities with a deep
understanding of markets in high involvement exporting firms. These support
innovation in products and processes through identification of customers’ needs,
product specifications, rapid prototyping, and flexible production systems. Moreover,
entrepreneurship orientation fosters new product development processes and the
ability to design new products. This dynamic nature of innovation (product and
process) has been suggested previously by Bagchi-Sen (1999).
Fourthly, market and social learning impact the firm’s exporting market expansion
and adaptation capabilities. Firms require deep learning about markets and social
networks to build their international presence and capture market opportunities. Firms
develop feedback mechanisms to adjust strategic postures, balance product portfolios,
and closely monitor competitors. This finding is in line with Young’s (1991) normative
about the value added role that learning has in international trade. More importantly,
this study shows that market expansion-adaptation capability is necessary to bring
innovation output to international markets and as such, becomes an exploitation
capability that triggers export performance. Consequently, it extends a preliminary
suggestion that market expansion shapes international strategies (Aulakh et al., 2000).
Finally, performance of high involvement Mexican exporting firms is supported on
market expansion-adaptation, innovation, and entrepreneurship capabilities. These
firms act proactively, assume risks, and explore wide range of strategic growth
options; thus being able to monitor innovation processes that leads to profitable
expansion into key markets. This dynamic perspective assures that firms’ long run
benefits are sustained in their absorptive capacity as suggested by Knudsen and
Madsen (2002). Overall, these conclusions confirm that exploration capabilities are
driven by organizational learning, whereas exploitation capabilities are built upon
technological and market resources in high involvement Mexican exporting firms.
The findings in this study provide managers with a better understanding of the
combination of capabilities that drive economic and strategic performance in exporting
oriented firms. The sources of sustainable growth and competitiveness reside in their
innovation, market expansion, and manufacture flexibility as firms adapt to
international demands. These capabilities should reflect a learning orientation and its
processes. Managers and TMTs should develop efficient and dynamic market,
technological, and relationship learning processes since these sustain innovation, market
expansion, and the capability to adapt to the typical uncertainty of international
enterprises. A rigorous entrepreneurship orientation is needed since this orchestrates the
realignment of competencies guides decision making in high involvement exporting
firms. Finally, managers are encouraged to establish metrics to assess the impact of
these capabilities and their relationships profitability and sales growth.
12. Limitations and further research Strategic
Although this study produces several relevant findings regarding exporting
capabilities, these should be evaluated in light of some limitations. First, the
capabilities in
parsimonious nature of the tested model considers only the exporting perspective. exporting
Future research may include the analysis of capabilities from the perspective of
importing firms. Second, findings reflect a cross-sectional assessment of TMT
self-reported perceptions. A longitudinal design is suggested to explore how exporting 1657
firms will shape these capabilities and their relationships over time. Third, the design
of exporting capabilities reflects different perspectives in the firm; as such, the use of
multiple informants is recommended. Moreover, the design of capabilities may vary
depending on firms’ activities, international TMT’s experience, and/or industry where
the firm participates. Forth, manufacture flexibility capability and market
expansion-adaptation could be modeled as multidimensional or higher order latent
structures; thus, future studies should revise their formative indicators. Fifth, all
measures were perceptual; despite direct efforts to control information bias and
associated common methods variance problems. Sixth, when adopting items and
scales developed in other cultural contexts, issues of measurement equivalence and
metrics are critical. Even though backward translation was used to address full content
equivalence meaning within the Mexican context, the scales in this study were not
generated through grounded theory. We encourage future studies to address the issue
of content validity and calibration from a cultural perspective. Finally, new research
inquiries may arise from comparing low involvement with high involvement exporters’
capability structures from a dynamic perspective and evaluating the paths that
entrepreneurship follows to performance. Latin America firms as they develop
sustainable business strategies provide a rich and challenging context to carry out
these future research inquiries.

Note
1. Sistema de Información Empresarial Mexicano (SIEM) is an initiative of the Mexican
Government which since 1996 integrates a registry of the Mexican Firms accessible on the
Internet at www.siem.gob.mx

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About the authors

Carlos M. Rodriguez is Associate Professor of Marketing and Director of the Center for the Study
of Innovation Management, CSIM in the College of Business at Delaware State University. His
research interests are in the areas of product design and development, new product development
teams, strategic alliances and international joint ventures, internationalization process and
market entry strategies, and business-to-business operations. Professor Rodriguez has published
in several leading academic journals including the Journal of Business to Business Marketing,
Journal of International Marketing, Journal of Electronic Business, International Marketing
Review, Journal of Business and Leadership, Management Decision, and Journal of Higher
Education and Research, as well as in several conference proceedings. He is the Reviews Editor
for the International Marketing Review based in the UK and member of the Editorial Board for
the Journal of Business to Business Marketing, Journal of Business and Leadership, Advances in
Business Research, Revista de Administracao Contemporanea (Brazil), Journal of Higher
Education and Research (Australia), and Decision Sciences Journal of Innovation Education, and
invited reviewer for the Journal of Asian Studies, Forum Empresarial, California Management
Review, Long Range Planning, and others. Dr Rodriguez has international exposure through
executive seminars in Mexico, Peru, Brazil, Croatia, Spain, Serbia, and Costa Rica, as well as
being visiting faculty in several institutions in France, Mexico, Brazil, Spain, and Croatia. He has
professional experience as Brand Manager, Product Manager, and Advertising Director for
consumer and industrial products and as a consultant in marketing and new product
development and strategy. Carlos M. Rodriguez is the corresponding author and can be
contacted at: crodriguez@desu.edu
 Jorge A. Wise is Associate Dean for Business at Tecnológico de Monterrey, Campus Strategic
Cuernavaca (south Mexico City.) Since 1980, Dr Wise has served in the areas of marketing and
international business for several companies in Mexico before joining Tecnológico de Monterrey capabilities in
as Professor. Dr Wise got his PhD from EGADE Business School. He was first Adjunct Professor exporting
for ten years before joining Tecnológico de Monterrey as a full-time Professor of International
Business and Marketing. He served in the International Business Department, Campus
Monterrey, as Coordinator of the Sales Program, Coordinator of the Strategic Sales Executive
Diploma, Coordinator of Minors in Marketing and International Business and as head of the 1663
Internationalization of the Firm Research Group among other activities; at Campus Cuernavaca,
he also joined the Competencies Research Group. Professor Wise is visitor scholar at IESEG
School of Management in Lille, France. He has also taught graduate and undergraduate courses
at universities in Europe, USA and Central and South America. In 2002, Professor Wise took the
first foreign students to participate in the National Collegiate Sales Competition held every year
at Kennesaw State University in the USA. He is the author and co-author of diverse research
papers presented at national and international forums. In 2003 he won the Annual Award for the
Best Design, Technological and Pedagogical for a course in marketing. He is an active reviewer
for many conferences and academic publications such as the Academy of Consumer Research, the
Journal of Business Research, and the Portuguese Journal of Management Studies among others.
He has been recognized as Best Reviewer in 2005 by the International Management Division of
the Academy of Management and in 2007 by the International Business Information
Management Association. As active professor and researcher, Dr Wise was recognized in 2006 as
one of best professors for his performance at the DAF School of Business and in 2010 with the
Best Professor Award, both at Tecnológico de Monterrey. He works as consultant for many
firms.
Carlos Ruy Martinez is Emeritus Professor of Marketing and International Business at the
EGADE Business School at the ITESM, Campus Monterrey, Mexico. Dr Martinez served as
Chairman of the Marketing Dept. at the ITESM, Campus Monterrey from 1979 to 1990. He is
founder of the Collegiate Chapter of the American Marketing Association at ITESM in 1979 (first
Chapter in Latin America). He was the founder and Curriculum Director of the Bachelor of
International Business in 1990-1992; and founder and Chairman of the International Business
Dept. in 1992-1993. He was Director of the Master in Marketing Program from 1997 to 2007.
Three times recipient of academic awards as Best Professor, including the best course of the
Virtual University at the ITESM, Dr Martinez has been a visiting professor at the graduate,
undergraduate and executive programs at the Ecole Superieure de Commerce de Paris (France,
spring semester 1985, and one-week visits 1999 to 2004); ESSEC (France, October 2007, 2008 and
2009); Reims Management School (Sup de Co Reims, France, May 2004, 2005 and 2006); EM Lyon
(France, May 2004 and 2005); Georgetown University (Washington, DC, summers of 1987 and
1988); The American Graduate School of International Management-Thunderbird at Glendale,
Arizona (summer and fall semester 1989, summers of 1990 to 1992) and at their French-Geneva
Campus (spring semester 1993); Baylor University (summers 1994 to 2003); The University of
Texas at San Antonio (summers 2004 to 2012); The University of Texas at Brownsville (spring
semester 2002); Trinity University (August to December 2009); and at different universities and
institutions in Spain, Chile, Venezuela, Peru, Honduras, Nicaragua, Panama, Colombia,
Guatemala and Bolivia. Since 2004 he has been the Global Coordinator of the International
Marketing Management in the OneMBA Program, in alliance with four major universities
throughout the world (Getulio Vargas, Brazil; University of North Carolina, USA; Rotterdam
School of Business, The Netherlands; and University of Hong Kong, China). He works also as a
consultant in the areas of marketing, marketing research and international marketing.

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