External Export Environment Factors

The external export environment factors comprise factors that present possible opportunities and threats to firms that are engaged in foreign operations. Often, these environment factors are beyond the control of the firm and tend to vary depending on the politico-legal, economic, socio-cultural and technological

characteristics of overseas markets (Aaby and Slater 1989). In the current review, four environment factors are broadly identified, consistent with the organisational behaviour literature (Dess and Beard 1984). These factors are: the degree of dynamism, diversity, hostility, and munificence of foreign markets. Over the years, export scholars have exerted much effort into examining how these factors alone, or in combination, influence firms‟ export strategies and export performance.

Environment dynamism has been defined as market conditions that are

associated with high unpredictability of customers and competitors and high rates of change in market trends and industry innovation (e.g., Wiklund and Shepherd 2005; Balabanis and Katsikeas 2003; Dess and Beard 1984).

Environment diversity (or heterogeneity) reflects the extent to which the export environment is complex (Dess and Beard 1984). Scholars argue that “managers facing a more complex (i.e., heterogeneous) environment will perceive greater

External Environment Factors:

Dynamism Diversity Hostility Munificence

Internal Organisational Factors:

Export marketing strategies Managerial characteristics Organisational characteristics E xp o rt p e rform a n c e

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uncertainty and have greater information-processing requirements than managers facing a simple environment” (Dess and Beard 1984, p.56).

Environment hostility indicates the degree to which the external environment is highly unfavorable for a firm‟s business. Unfavorable environmental conditions stem from radical industry changes, intense regulatory burdens placed on an industry, or fierce rivalry among competing firms in an industry (Zahra and Garvis 2000). The perceived environment hostility also emanates from perceived

competitive-, market-, and product-related uncertainties (Dess and Beard 1984), changing demand conditions and radical innovations that render the basic technology of firms obsolete (Zahra and Garvis 2000), intense rivalry among industry competitors, and the number of competitors competing in an industry. Zahra (1993) reasons that in hostile and highly intensive competitive

environments firms must devote scarce resources in order to effectively manage the unfavorable environments to ensure the achievement of their organisational goals.

Environment munificence reflects the extent to which the environment can support sustained growth (Dess and Beard 1984; Castrogiovanni 1991; McArthur and Nystrom 1991). According to Dess and Beard, a munificent environment is reflective of Aldrich's (1979) notion of environmental capacity. Several scholars agree that the growth and stability in munificent environments allow firms to generate slack resources, which can in turn provide the firms with a buffer during periods of relative resource scarcity (e.g., Wiklund and Shepherd 2005; Dess and Beard 1984).

Scholars have observed that the environment can affect export performance directly (e.g., Balabanis and Katsikea 2003; Yeoh and Jeong 1995; Zahra and Garvis 2000). For example, Yeoh and Jeong (1995, p. 102) observe that “firms may view uncertainty arising in their environment as opportunities and, hence, may proactively take advantage of changes in the environment through innovative and aggressive marketing activities such as development of new products and/or markets” to enhance their performance. Moreover, Zahra and Garvis (2000) estimate that environmental hostility can have significant influence on firms‟ ability to succeed in international markets. Similarly, many export marketing studies (e.g.

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Bonaccorsi 1992; Chetty and Hamilton 1993; Kaynak and Kuan 1993; Naidu and Prasad 1994) have revealed that a firm‟s market environment including its degree of hostility, dynamism, diversity and munificence are associated directly with export performance. In fact, researchers believe that the competitive intensity of foreign markets might have a strong impact on firm performance (McGahan and Porter 1997; Scherer and Ross 1990).

However, a review of the literature shows mixed results with regards to the link between competitive intensity and export performance. While researchers as such O‟Cass and Julian (2003) have reported that low market competitiveness leads to high export performance, Morgan, Kaleka and Katsikeas (2004) have argued that high degree of competitive intensity is not significantly associated with export performance. In contrast, Lages and Montgomery (2005) have established that high competitive intensity is positively associated with export success. It has also been argued that firms perform better in more hostile and competitive

environments than in more stable and generous environments because firms tend to relax excessively in markets that are easier to operate in (Sousa, Martínez- López and Coelho 2008).

Some other studies have also mentioned cultural similarity as an important aspect of the external overseas market environment, and as a significant determinant of export performance. Scholars interested in this subject mention that there is a logical reason to explain why cultural similarity is positively related to export

performance (e.g., Lee 1998; Shoham, Rose and Albaum 1995). Their logic is that similarities (between firms‟ home culture and that of foreign market culture) are easier for firms to manage than dissimilarities are; as such it is more likely for firms to succeed in culturally similar markets. This notion of cultural similarity is consistent with the findings of Lado, Martinez-Ros and Valenzuela (2004), who report that culturally similar markets reduce the perceived risk of failure and

provide incentives to companies with a limited exposure to foreign markets to start trading in those markets. On the contrary, cultural dissimilarity can increase the complexity of obtaining and interpreting information on foreign market conditions, thereby increasing the chances of managers making wrong foreign market

decisions, and consequently decreasing the prospect of generating „good‟ export performance (Boyacigiller 1990).

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