Being_an_Entrepreneurial_Exporter-Does_It_Pay

International Business Review 12 (2003) 233–252 www.elsevier.com/locate/ibusrev Being an entrepreneurial exporter: does it pay' George I. Balabanis a,∗, Eva. S. Katsikea b a City University, Cass Business School, Frobisher Crescent, Barbican Centre, London EC2Y 8HB, UK b School of Management and Business, University of Wales, Aberystwyth, UK Received 1 February 2002; received in revised form 1 July 2002; accepted 1 September 2002 Abstract The relationship between the adoption of an entrepreneurial posture and export performance has rarely been explored in the export marketing literature and this empirical inquiry strives to fill this gap. Following a review of the relevant literature, specific organisational and environmental factors were identified as potential determinants of firms’ abilities to adopt an entrepreneurial posture and export performance. The study findings reveal that firms with organic organisational structures and relatively large size are more likely to adopt an entrepreneurial posture. Additionally, entrepreneurial posture was found to impact positively export performance whereas environmental hostility affects negatively export performance. Finally, study results indicated that exporters adopt an entrepreneurial posture within dynamic environments but not in hostile and diverse environments. The implications of the study for marketing researchers and practitioners are highlighted and future research streams identified.  2003 Elsevier Science Ltd. All rights reserved. Keywords: International marketing; Entrepreneurial posture; Export performance 1. Introduction Entrepreneurship has become a key element in modern business environments. It has been associated, among other things, with the creation of jobs and higher growth. Some politicians even want entrepreneurship to be taught at schools (Economist, 14 March 1998, p.34) as a way to revitalise their country’s economic growth. Moreover, entrepreneurship has been linked with risk-taking and innovation (Jennings & ∗ Corresponding author. Tel.: +44-20-7040-0226; fax: +44-20-7040-8328. E-mail address: g.balabanis@city.ac.uk (G.I. Balabanis). 0969-5931/03/$ - see front matter  2003 Elsevier Science Ltd. All rights reserved. doi:10.1016/S0969-5931(02)00098-7 234 G.I. Balabanis, E.S. Katsikea / International Business Review 12 (2003) 233–252 Lumpkin, 1989; Covin & Slevin, 1991; Zahra, 1993; Lumpkin and Dess, 1996) as well as with the export successes of many Small and Medium-sized Enterprises (SME) in diverse places like Taiwan (Economist, 7 November 1998, p.47), Italy (Economist, 2 March, 96, p.36) and Germany (Economist, 16 December 1995, p.54). Despite the plethora of anecdotal evidence regarding the importance of entrepreneurship on the export success of SMEs, there is a limited number of studies linking entrepreneurhip with export performance (Zahra, Neubaum & Huse, 1997; Caruana, Morris & Vella, 1998). As export markets tend to be more diverse than domestic ones and in many instances more hostile and dynamic, the examination of the entrepreneurship-performance link within this context becomes more important. Due to the nature of diverse international environments, the adoption of an entrepreneurial posture becomes a necessity (Covin and Slevin, 1989; Lumpkin and Dess, 1996). However, it appears that entrepreneurship is not a blanket solution for every type of organisation. As will be explained in detail later, a firms’ size, age and organisational structure determine a firm’s ability to adopt an entrepreneurial posture as well as it ability to reap the benefits of such a posture. The objective of the present study is threefold: firstly, to assess whether exporting firms that adopt an entrepreneurial posture perform better than other exporting firms; secondly, to determine whether diverse, dynamic and hostile export market environments moderate the impact of entrepreneurial posture on export performance; and finally, to examine whether a firm’s size and organisational structure affect the adoption of an entrepreneurial posture and export performance. The findings of the study will be significant for both academics and practitioners in different manners. First, they will help academics to understand better the interrelationships between environment, a firm’s characteristics, entrepreneurial posture and export performance, considering that there is very little and fragmented research in that area. Additionally, the results will provide guidance to business practitioners in determining the conditions that favour the adoption of an entrepreneurial posture; and assess the effects of adopting such a posture to their performance. In order to attain these objectives, this empirical inquiry is structured as follows: Firstly, the concept of entrepreneurial posture is defined and the conditions influencing its adoption are investigated. Secondly, evidence regarding the impact of entrepreneurial posture on performance is reviewed. The research methodology is then presented and the main findings are discussed within the scope of the export marketing literature. Finally, a discussion is made on the implications of the study and future research streams are suggested. 2. Pertinent literature and conceptual framework 2.1. Entrepreneurship and entrepreneurial posture Entrepreneurship is a broad concept and is linked with individuals (Collins & Moore, 1964; Cooper, Woo and Dunkelberg, 1986); new ventures (Vesper, 1985), as well as with the ongoing operations of different business organisations (Jennings & G.I. Balabanis, E.S. Katsikea / International Business Review 12 (2003) 233–252 235 Lumpkin, 1989; Covin & Slevin, 1991; Zahra, 1993; Lumpkin & Dess, 1996). This paper concentrates on entrepreneurship at an organisational level. Academics describe organisations that behave in an entrepreneurial manner, as organisations that adopt entrepreneurial postures or entrepreneurial orientations (Jennings & Lumpkin, 1989; Covin & Slevin, 1991; Zahra, 1993; Lumpkin & Dess, 1996). According to Covin and Slevin (1991) entrepreneurial posture is reflected by “…top management risk taking with regard to investment decisions and strategic actions in the face of uncertainty; the extensiveness and frequency of product innovation and the related tendency towards technological leadership; and the pioneering nature of the firm as evident in the firm’s propensity to aggressively and proactively compete with industry rivals”. Therefore, entrepreneurial posture is determined by three main attributes: namely, the organisation’s propensity to take risks, innovation and proactiveness (Covin & Slevin, 1991; Stopford & Baden-Fuller, 1994; Lumpkin & Dess, 1996; Ripsas, 1998). 2.2. Conceptual framework and hypotheses A review of the extant literature on entrepreneurial posture area (Guth & Ginsberg, 1990; Covin & Slevin, 1991; Zahra, 1993; Gnyawali & Fogel, 1994; Lumpkin & Dess, 1996) in combination with a series of exploratory interviews with managers of exporting firms led to the development of the theoretical framework of Fig. 1. Accordingly, it was theorised that a firm’s export performance is affected by the Fig. 1. The hypothesised model. 236 G.I. Balabanis, E.S. Katsikea / International Business Review 12 (2003) 233–252 extent to which the firm adopts an entrepreneurial posture. However, as it will be explained later, export performance and entrepreneurial posture are affected by a number of internal (organisational) and external (environmental) factors. In particular, three organisational factors seem to be of particular relevance on entrepreneurial posture: the firm’s size, its organisational structure and its age. Additionally, the environmental factors that have a bearing on both export performance and the extent to which an organisation adopts an entrepreneurial posture are: the dynamism, the hostility and the diversity of the export market environment. Each of the above attributes and their relationship with entrepreneurial posture and export performance are described and justified subsequently. 2.3. Antecedents of entrepreneurial posture Relevant research (Guth & Ginsberg, 1990; Covin & Slevin, 1991; Zahra, 1993; Gnyawali & Fogel, 1994; Lumpkin & Dess, 1996) suggests that two broad categories of factors affect a firm’s proclivity to adopt an entrepreneurial posture: (i) external (environmental) or (ii) internal (organisational) factors. The relevance and conceptual domain of these two distinct categories are examined in detail below. 2.3.1. External factors The role of the market environment on the development of strategies and adoption of a strategic posture by exporting firms is well documented in the relevant literature (Jain, 1989; Cavusgil & Zou, 1994). Classical and current theories on strategy development (for a review and critique see Mintzberg, 1993) suggest that profit maximising firms should develop strategies that match the needs of their market environments. There is no departure from this principle in the export context. Similarly, export marketing literature confirms that the external and internal environments jointly shape the strategies and postures adopted by rational exporters (Jain, 1989). Entrepreneurship is an environmentally driven phenomenon (Morris & Lewis, 1995). Three attributes of the market environment appear to be the main environmental drivers of entrepreneusrship (Dess & Beard, 1984): hostility, dynamism, and heterogeneity or diversity. All three attributes are relevant to this study as they influence the adoption of an entrepreneurial posture (Covin & Slevin, 1991; Zahra, 1991, 1993; Zahra, Neubaum & Huse, 1997). Hostility characterises environments with “precarious industry settings, intense competition, harsh, overwhelming business climates and the relative lack of exploitable opportunities” (Covin & Slevin, 1989, p.75). Hostility is the opposite of environmental munificence (Miller et al., 1983) which describes rich in opportunities and resources environments that guarantee a safe operation of a firm (Khandwalla, 1977; McArthur & Nystrom, 1991). Dynamism on the other hand, characterises fast and frequently changing environments (Dess & Beard, 1984; McArthur & Nystrom, 1991); whereas, diversity (or heterogeneity) refers to environments that are composed by many dissimilar components unrelated to each other (Nwachukwu & Tsalikis, 1991; McArthur & Nystrom, 1991). In export market studies environmental diversity is normally expressed by three elements: cultural dissimilarity, economic dissimilarity and the physical distance of export markets (Vachani, 1991). G.I. Balabanis, E.S. Katsikea / International Business Review 12 (2003) 233–252 237 All three attributes (dynamism, hostility and diversity) individually or jointly tend to make environments more unpredictable and more uncertain (Covin & Slevin, 1991). To cope with environmental uncertainty, many organisations adopt an entrepreneurial posture (Mintzberg, 1973; Miller et al., 1988). Accordingly, these conditions provide the stimulus to a firm to adopt an entrepreneurial posture. Empirical evidence supports the view that organisations operating in hostile, dynamic and heterogeneous environments are more likely to adopt an enterpreneurial posture. For example, Miller and Friesen (1982); Miller (1983); Khandwalla (1987); Covin and Slevin (1989); Zahra and Covin (1995); Zahra et al. (1997) and Zahra & Neubaum (1998) found that dynamism, heterogeneity and hostility are all positively related to each of the components of entrepreneurial posture (i.e. risk-taking behaviour and the adoption of innovative and proactive) and entrepreneurial posture itself. As the market environment of exporting firms tends to be more diverse and more risky than firms operating in domestic markets (Albaum, Duerr & Strandskov, 2001), firms are likely to co-align their orientation to the environment by adopting an entrepreneurial posture. Based on the above the following hypotheses are stated: H1a: The more dynamic the export market environment of an exporter the greater the extent to which it will adopt an entrepreneurial posture H1b: The more hostile the export market environment of an exporter the greater the extent to which it will adopt an entrepreneurial posture H1c: The more heterogeneous (diverse) the export market environment of an exporter the greater the extent to which it will adopt an entrepreneurial posture 2.3.2. Internal factors 2.3.2.1. Firm size As firms become larger, they tend to become less entrepreneurial (Cornwall & Perlman, 1990; Knight, 1987; Zahra, 1986). Small organisations would be more innovative because they have more flexibility, a higher ability to adapt, and less difficulty in accepting and implementing change. The large number of employees makes it difficult to manage large firms. So these firms develop layers of administrative staff and formal rules of communication to adapt to this situation. Moreover, large firms need more formal systems to co-ordinate their activities. New ideas have to go through more layers of administration and entrepreneurial employees often struggle to get approval for their ideas. The additional layers of screening and group decision making dilute the contributions of enterpreneurial employees. As such employees are less able to be rewarded for the outcomes of their efforts and have fewer incentives to remain entrepreneurial (Cohen & Levin, 1989). In summary, large firms are less likely to provide the proactive, responsive, risk-taking atmosphere to their employees in comparison with small firms. On the other hand, many researchers have argued that size facilitates one of the components of entrepreneurship, innovation (Ettlie et al., 1984; Kimberly & Evanisko, 1981). Large organizations have accumulated more skills and resources (financial slack, marketing skills, research capabilities, product development experi- 238 G.I. Balabanis, E.S. Katsikea / International Business Review 12 (2003) 233–252 ence, etc.) which can boost innovation (Nord & Tucker, 1987). A greater pool of resources gives large firms more space to take risks and tolerate losses from unsuccessful entrepreneurial efforts. Large firms may have the economies of scope to spread the risks of various entrepreneurial endeavours and the fixed costs of R&D. As a result, large firms are less vulnerable to the failure of a particular project, because it would entail a smaller proportion of their resources than it would for a small firm. Although there is a consensus on that size influences entrepreneurial posture, there is a lack of agreement regarding the direction of this relationship. Large firms can suffer from organisational inertia and will be less enterpreneurial, whereas on the other hand, they have many financial and technical capabilities and resources that allow them to take risks and to embark into various innovative projects. In light of the above disagreement it might be postulated: H2a:. The size of an exporter is related to the extent to which it will adopt an entrepreneurial posture 2.3.2.2. Age The age of a firm is related to one of the main components of entrepreneurial posture, innovation (Hansen, 1992). The history of a firm provides a platform for its values, routines and traditions. Well-developed routines and traditions can guide present postures as well as the future orientations. Teece et al. (1997) suggest that the current resources of a firm as well as the firm’s ability to renew them are determined by the path the firm has travelled (i.e. its history). The history of a firm is important as it can generate path dependencies, irreversibilities that constrain a firm’s future behaviour and actions (Bercowitz et al., 1996). Compared to older firms, newer firms are not bound by traditions and timeworn routines and as a result have more freedom in making decisions and taking risks. Thus, older firms are more likely to have developed settled processes or routines in making decisions and developing strategies that may inhibit innovative and risk taking behaviour, in other words, their ability to adopt an entrepreneurial posture. Consequently, the following hypothesis is advanced: H2b:. The older an exporting firm, the lesser the extent to which it will adopt an entrepreneurial posture 2.3.2.3. Organisational structure The degree of decentralisation and complexity appear to be the most important characteristics of organisational structure (Hage, 1965). Decentralisation describes the distribution of authority within an organisation. The main dimensions of decentralisation are hierarchy of authority and degree of participation in the decision-making process (Fry & Slocum, 1984). The second element of organisational structure, complexity, is characterised by three attributes: (1) horizontal differentiation, (2) vertical differentiation, and (3) spatial differentiation (Miller & Droge, 1986). Horizontal differentiation refers to the degree of divisionalisation, whereas, vertical differentiation refers to the number of hierarchical levels within an organisation (Miller & Droge, 1986). Spatial differentiation, on the G.I. Balabanis, E.S. Katsikea / International Business Review 12 (2003) 233–252 239 other hand, refers to the number of operating sites (Miller & Droge, 1986). Organisations may adopt two types of structures depending on the way they combine decentralisation and complexity: (1) a mechanistic structure or (2) an organic structure (Burns & Stalker, 1961). An organic structure is characterised by a high degree of participation in decision-making, a low degree of hierarchy of authority, and a high degree of complexity (e.g. matrix types of structure) (Burns & Stalker, 1961; Khandwalla, 1977). On the other hand, a mechanistic structure is described by low levels of decentralisation and complexity. It has been suggested that organic structures remove many of the obstacles in the adoption of an entrepreneurial structure (Slevin & Covin, 1990). For example, the decentralisation of authority allows for less formalised rules and procedures and more autonomy to individuals and units within a firm. Organic structures are linked with participative decision making and open, frequent and informal communication across functional boundaries. According to Olson et al. (1995, p.51) these characteristics of organic structure “…can create an atmosphere where innovative ideas are proposed, critiqued, and refined with a minimum of financial or social risk”. Such structures allow personal autonomy and individual creativity to grow and as a consequence are favourable to entrepreneurial posture (Khandwalla, 1977; Slevin & Covin, 1990; Zahra, 1991, 1993; Covin & Slevin, 1991; Caruana et al., 1998; Covin & Slevin, 1998). Accordingly, the following hypothesis is developed: H2c: The more organic the organisational structure of an exporter the greater the extent to which it will adopt an entrepreneurial posture 2.4. Entrepreneurial posture and export performance As has been mentioned earlier there is a scarcity of studies that link entrepreneurial posture with exporting. In general, export markets tend to be more complex; more unpredictable and possibly more hostile (to foreign firms) than domestic markets— conditions that favour the adoption of an entrepreneurial posture. The adoption of an entrepreneurial posture for firms operating in such environments is likely to increase their performance (Slevin & Covin, 1990). Most of the research in the area (Imbrahim & Goodwin, 1986; Guth et al., 1990; Covin, 1991; Covin & Slevin, 1991; Zahra, 1993; Herron & Robinson, 1993; Lumpkin & Dess, 1996) indicates a positive relationship between entrepreneurship and performance. Specifically, entrepreneurial posture increases performance by increasing the motivation and self-efficacy of management (Keats & Bracker, 1988). An entrepreneurial posture can result in early entry or pioneer advantages (Cooper, 1979; Cahill, 1996) in new markets, which in turn may be responsible for superior performance. Empirical support to the relationship between performance and entrepreneurial posture in non-exporting contexts is ample (Zahra, 1986; Covin & Slevin, 1986; Zahra, 1991; Zahra, 1993; Smart & Conant, 1994; Zahra, 1995; Morris & Sexton, 1996; Becherer & Maurer, 1997). Thus, based on the above arguments it has been hypothesised that, 240 G.I. Balabanis, E.S. Katsikea / International Business Review 12 (2003) 233–252 H3: The greater the extent to which en exporter adopts an entrepreneurial posture, the greater its export performance 2.5. Control variables As can be seen in Fig. 1, a number of direct relationship for internal and external environments have been added as well as a number of control variables to minimise the emergence of spurious effects. Environment seems to affect performance directly. There are certain elements of the environment whose effects cannot be controlled by a firm’s actions and strategies. For example, Dess and Beard (1984) observed that non-hostile (munificent) environments increase performance regardless of the company’s strategic posture or strategy. Similarly, export marketing research (Bonaccorsi, 1992; Chetty & Hamilton, 1993; Kaynak & Kuan, 1993; Naidu & Prasad, 1994; Holzmuller & Stottinger, 1996) has shown that both a firm’s market environment and its size are associated directly to export performance. A firm’s size can influence performance through economies of scale and scope and bargaining power leverage. Organic structure also was found to have a direct effect on a firm’s performance (Covin & Slevin, 1988; Slevin & Covin, 1990). The autonomy and flexibility of organically structured firms enables them to be more receptive and responsive to environmental changes and as a result more effective. In light of the above, environmental and organisational attributes were used as control variables of the entrepreneurial posture–export performance relationship. These relationships are represented as dented lines in the Fig. 1 model. 3. Methodology 3.1. Sample and data collection The data collection method was a postal survey. In particular, a questionnaire was sent to a sample of 500 UK exporters which were randomly drawn from the Dun & Bradstreet database. The key informant approach was used and the recipients of the questionnaire were chosen to be the managing directors of the companies. The items included in the questionnaire were drawn from the relevant literature and were pretested using the debriefing approach in a sample of five exporters (Hunt, Sparkman & Wilcox, 1982). Three weeks after the initial mailing a reminder letter and a new questionnaire was sent to the non-respondents. At the end a total of 82 usable responses were received that was similar to the samples used on entrepreneurship studies (e.g. Dess, Lumpkin & Covin, 1997; Naman & Slevin, 1993; Covin & Slevin, 1989). After adjusting for non-eligible firms (no longer in business or no longer exporting) the effective response rate reached 18.5% (Wiseman & Billington, 1984). Questionnaires were analysed using the time trend procedure proposed by Armstrong and Overton (1977). Analysis indicated no significant differences in the variables of interest between late and early respondents, providing no evidence for non-response bias. A random sample of 30 non-respondents was contacted by telephone checking G.I. Balabanis, E.S. Katsikea / International Business Review 12 (2003) 233–252 241 the reason for no participating in the study. The main reasons identified were either that the company is no longer in business or exporting, the company has a policy of not participating to surveys, or that time pressures prevented participation or that the main recipient of the questionnaire is not with the company any longer. None of the above reasons is directly related or affects responses to the issues examined by this study. 3.2. Measures Entrepreneurial Posture. A scale developed by Covin & Slevin, 1986, 1988) was used to assess the company’s entrepreneurial posture. The scale is a nine-items sevenpoint Likert scale. The scale comprises the following elements of entrepreneurship: innovativeness, proactiveness and risk-taking. Confirmatory factor analysis was used to assess the unidimensionality and validity of the scale. Results using Kaplan’s (1990) modification procedure (i.e. checking high modification indices and high expected changes) indicated that three items had to be removed (items 3, 4 and 6). The fit of the remaining six items was adequate (c 2(9) = 9.04, p = 0.433, RMSEA = 0.008, GFI= 0.964, AGFI = 0.916). Additionally, Cronbach’s alpha reliability coefficient was also at an acceptable level, a = 0.734. Environmental Hostility. Khandwalla’s (1977) three-item seven-point bipolar scale was used to measure environmental hostility. Confirmatory factor analysis results indicated a perfect fit (saturated model) and that modifications were not necessary. The reliability (Cronbach’s alpha) of the scale was acceptable (a = 0.713). Environmental Dynamism. Environmental dynamism was measured on Miller and Friesen’s (1982) five-item seven-point bipolar scale. Initial results from confirmatory factor analysis indicated that a modification was necessary to improve the model’s fit. Namely one item (item 4) had to be removed from the scale. The reduced four0.005, item model had an acceptable fit (c 2(2) = 0.37, p = 0.831, RMSEA GFI= 0.998, AGFI = 0.99). Cronbach’s alpha reliability coefficient was at an acceptable level, a = 0.735. Environmental Diversity. The diversity of an exporter’s environment was assessed by using three measures: (i) geographical diversity; (ii) economic dissimilarity and (iii) cultural dissimilarity of its markets (Vachani, 1991). Geographical diversity of the markets was measured through and application of the entropy measure of diversification proposed by Palepu (1985). Entropy measures are estimated through the use of the following formula: Entropy measure Pjln 1 Pj where Pj is defined as the proportion of sales in geographical region j and ln(1/Pj) is the weight for each segment j (the logarithm of the inverse of sales). The main reason for preferring this measure than simple country count is that it takes into account both the number of regions in which a firm operates and the relative importance of each region. Moreover, this measure was found to be more reliable and valid compared to other measures (Hoskisson, Hitt, Johnson & Moesel, 1993). 242 G.I. Balabanis, E.S. Katsikea / International Business Review 12 (2003) 233–252 The entropy formula was applied to World Bank’s classification of geographical regions plus the UK (given the origins and export character of the investigated firms). This classification was preferred because it is widely used and familiar to respondents and it is logical. In particular, respondents were asked to indicate what percentage of their sales is directed towards: the UK; other than UK European Union countries, rest of Europe, North America, Latin America, Near & Middle East, North Africa, West Africa, Other African countries, Asia and Oceania. To assist the respondents a list of the countries belonging to each regional grouping was provided. Cultural similarity (as opposite to cultural dissimilarity) was measured by the concentration of a firm’s exports to countries that are culturally similar to the UK. Specifically, Ronen & Shenkar’s (1985) country clustering was used. According to Ronen & Shenkar (1985), the UK belongs in the same cultural cluster with the US, Canada, New Zealand, Australia, South Africa and Republic of Ireland. Respondents were requested to indicate what percentage of their exports is directed to this group of countries. Similarly economic similarity (i.e. opposite to cultural dissimilarity) was assessed by the concentration of a firm’s exports to countries with same level of economic development as the UK (i.e. developed countries). The World Bank’s classification of countries according to their economic development was used. Namely, respondents were asked to indicate what percentage of their exports is directed towards other EU countries, North America, Japan, South Africa, Australia and New Zealand. This percentage was used to assess the level of economic similarity of an exporter’s markets. Size of the firm. The most common measure of size in the enterpreneurship and innovation as well as exporting research is the number of a firm’s employees. This measure is highly correlated with other measures of size such as, sales and size of assets. This measure is theoretically appealing, because many of the problems of large firms (as explained earlier) are due to the increased need for co-ordination as a firm employs more people. Therefore, we operationalise firm size as the number of employees in the firm. Organic organisational structure. Khandwalla’s (1977) measure of the extent to which an organisation is structured in an organic or in a mechanistic mode was used. Namely a seven-item seven point bipolar scale was used. To confirm the unidimensionality of the scale, confirmatory analysis was used. Results indicated that some modification were necessary to improve fit. After removing one item (i.e. item 6) the fit of the model was acceptable (c 2(9) = 11.01, p = 0.275, RMSEA = 0.053, GFI = 0.958, AGFI = 0.893). Reliability was also at acceptable levels (a = 0.764). Export Performance. Export performance was assessed on three indices used in enterpreneurial studies (Murphy, Trailer & Hill, 1996; Dess, Lumpkin & Covin, 1997) and adapted to the export context. In particular, four-item ten-point bipolar (ranging from 1 “low performer” to 10 “high performer”) rating scales were used. Respondents were asked the following question “please assess your organisation’s export performance over the past five years relative to your competitors (5 representing the industry average)”. The categories used were export sales growth, export profits; return on investment from exports and overall export performance. G.I. Balabanis, E.S. Katsikea / International Business Review 12 (2003) 233–252 243 The scale used is very similar in content to that proposed by Cavusgil and Zou (1994). Confirmatory analysis was used to check the structure of the scale. Results showed that the error terms of export sales growth were highly correlated with those of overall export performance, which suggests an overlap in the content of the two items. As a result, export sales growth was removed and the fit of the model improved (i.e. achieved perfect fit). Cronbach’s alpha reliability coefficient was also quite high (a = 0.850). 4. Analysis and results 4.1. Hypotheses testing In order to test the above hypotheses and to capture the complexity of interrelationships between the variables a path-analytical approach was used. Specifically, a classical path analysis was performed using LISREL 8 statistical software package (Joreskog & Sorbom, 1993). Initial results showed that the Fig. 1 model needed ¨ ¨ some modifications. It was found that size is related negatively with the organicity. As this relationship seemed logical and theoretically sound was included in the model. This confirms suggestions by literature (Dyer, 1992) that co-ordination problems make it difficult for larger firms to adopt organic organisational structures. After the modifications the model’s fit was satisfactory with a statistically insignificant chi-square (c 2(6) = 6.086 (p = 0.437)). To make visual representation and interpretation more effective, only the statistically significant paths were retained in the trimmed model of Fig. 2. The standardised coefficients beta and gammas and their significance levels are depicted in the path diagram of Fig. 2. Hypothesis H1a predicted a positive relationship between environmental dynamism and the adoption of an entrepreneurial posture by a firm. Results in Fig. 2 are supportive of hypothesis H1a at a significance level of a = 0.05. Indeed, of all the attributes of a market environment, only fast and frequently environmental changes (dynamism) trigger the adoption of an entrepreneurial reaction by exporters. Environmental hostility and heterogeneity do not have any influence on the extent to which firms adopt an entrepreneurial posture. Thus, hypothesis H1b and H1c that predicted a positive relationship between environmental hostility and heterogeneity with entrepreneurial posture respectively are not supported. It is worth mentioning that none of the three indices used to measure the diversity of export markets (i.e. geographical diversity, and economic and cultural similarity) was statistically significant. These findings are in line with those of Nwachukwu & Tsakujus (1991). Hypothesis H2a predicted a relationship between the firm’s size and entrepreneurial posture. Findings in Fig. 2 provide full support for hypothesis H2a as size is related to entrepreneurial posture at a significance level (a = 0.05). It appears that entrepreneurial postures are indeed resource demanding. Similarly, H2b that predicted a positive relationship between organic organisational structure and entrepreneurial posture is empirically supported at an significance level of 0.01. Indeed, 244 G.I. Balabanis, E.S. Katsikea / International Business Review 12 (2003) 233–252 Fig. 2. Trimmed model-standardised solution. organically structured exporters are more entrepreneurial than mechanistically structured ones. As mentioned earlier findings confirm the view that a firm’s size influences negatively the extent to which exporters adopt an organic organisational structure (Dyer, 1992). However, this finding provides an explanation in the conflicting results regarding the relationship between a firm’s size and entrepreneurial posture. It has been suggested that large firms can overcome the obstacles to innovation and the adoption of an entrepreneurial posture by creating small divisions and by adopting an organic structure. This can provide the autonomy, flexibility and employee incentives necessary for innovation and entrepreneurship (Damanpour, 1992). Thus, size has a direct positive effect on entrepreneurial posture (H2a) as well as an indirect negative effect by affecting negatively organicity (which is related positively to entrepreneurial posture). Organisational structure mediates the effects of size on entrepreneurial posture. Finally hypothesis H3 that predicted a positive relationship between export performance and entrepreneurial posture is also empirically supported at a significance level a = 0.05. Indeed entrepreneurial exporters were found to perform better than non-entrepreneurial ones. Moreover, our findings seem to confirm Dess and Beard (1984) thesis that that munificent or non-hostile environments increase performance regardless of the company’s posture or strategy. Our results show that environmental hostility, operationalised as the opposite of munificence reduces export performance. G.I. Balabanis, E.S. Katsikea / International Business Review 12 (2003) 233–252 245 4.2. Does the adoption of an entrepreneurial posture result in higher performances under any circumstances' Results indicated that the adoption of an entrepreneurial posture increases export performance. However, there is a group of academics who argue that entrepreneurial posture is more appropriate for specific types of environments. For example, Priem, Rasheed and Kotulic (1995) and Goll & Rasheed. (1997) showed that an entrepereneurial approach is not appropriate for firms with non-dynamic and non-hostile environments. Actually they showed that the adoption of an entrepreneurial posture in that case decreases their performance. It appears that stable and non-hostile environments may justify the adoption of a more cautious and conservative management approach (i.e. that involves no-risk taking, no-proactiveness, and noinnovation). Slevin and Covin (1990) also postulate that the combination of an entrepreneurial posture with an organic structure could increase a firm’s performance. They suggest that risk taking is not going to help a mechanistic firm. For a firm to take a full advantage of the benefits provided by entrepreneurial posture, it needs to have an organic structure. To detect whether such interaction effects exist in an exporting context, moderated regression analysis was employed (Jaccard, Turrisi & Wan, 1990). This type of analysis involves two steps. In the first step, the independent variables are regressed against the dependent variable and the resulting R square is noted. In the second step the product of the independent variables is formed and is added in the regression analysis (of step 1) together with the dependent variables. Statistically significant increases of the R square (that result from the addition of the product term in the new equation) indicate the existence of an interaction effect between the two variables (Jaccard et al., 1990). To assess how environmental and organisation factors moderate the impact of entrepreneurial posture on performance this approach was employed. In the first step entrepreneurial posture together with one of the variables listed in Table 1 were regressed against export performance. In the second step, the Table 1 Moderated regression analysis: Changes in the R square and significance level The product of entrerpreneurial posture with each of the following: External factors Hostility Dynamism Geographical diversity Economic similarity Cultural similarity Internal factors Firm’s Size Organicity Firm’s age Changes in R square Significance level of R square changes 0.029 0.015 0.003 0.009 0.082 0.009 0.002 0.072 0.118 0.261 0.635 0.389 0.009 0.389 0.722 0.106 246 G.I. Balabanis, E.S. Katsikea / International Business Review 12 (2003) 233–252 product term of the entrepreneurial posture with each of the variables, respectively, was added to the regression equation and the respective changes in R square and their significance levels were noted. As can be seen in Table 1, results do not support the view that the effects of entrepreneurial posture on performance are moderated by organisational structure and environmental hostility or dynamism. The only variable that has a significant moderation effect on the impact of entrepreneurial posture on performance is cultural similarity. A detailed inspection of the regression equation showed that firms exporting to culturally dissimilar countries will benefit more from the adoption of an entrepreneurial posture than other firms. Possibly, the unfamiliarity and increased uncertainty of the culturally dissimilar markets may require exporters to adopt a more entrepreneurial approach. In summary the study established the following: 1. Exporters respond to dynamic environments by adopting an entrepreneurial posture (H1a); but the same is not true for hostile and diverse environments 2. Exporters with an organic organisational structure are more likely to adopt an entrepreneurial posture (H2b) 3. Larger firms are more likely to adopt an entrepreneurial posture but less likely to adopt an organic structure 4. Entrepreneurial posture has a direct positive effect on export performance 5. Environmental hostility affects negatively export performance 6. No moderation effects between entrepreneurial posture and external and internal factors were identified. The effects of entrepreneurial posture on export performance appear to be the same to all types of firms and environments. It appears that only firms exporting to culturally dissimilar countries may benefit slightly from the adoption of an entrepreneurial posture. 5. Conclusions Overall, the study achieved its objectives and provided useful insights in a little researched area. Most of the hypotheses put forward were supported and a number of conclusions can be drawn. The most important finding of the study is that there is a direct relationship between entrepreneurial posture and export performance; a relationship not conditioned by any environmental and organisational contingencies. Entrepreneurial exporters appear to have higher levels of performance than non-entrepreneurial ones. Although, it is still intuitively appealing to suggest that a firm should adjust its level of entrepreneurial posture to the market conditions and organisational characteristics, our results lead to the conclusion that such an adjustment may not lead to significant differences in export performance. Thus, the adoption of an entrepreneurial posture is something that profit-maximising firms have to consider and pursue actively for their export operations regardless the conditions of their markets. The study also showed that export performance is lower for firms operating in hostile environments. As an entrepreneurial posture can not avert or alleviate the G.I. Balabanis, E.S. Katsikea / International Business Review 12 (2003) 233–252 247 negative influences of hostile environments one performance, a spontaneous reaction is for exporters to avoid operating in such environments. Avoidance of hostile markets is something routinely recommended in international marketing textbooks (Jain, 1989; Albaum et al., 2001) in the market screening stage. However, such an approach may lead firms to miss market opportunities in several countries. Exporters need to take a more critical and discriminating approach is needed to deal with environmental hostility. As our study did not examine alternative postures to deal with hostile export-market environments (i.e. examined only the adoption of an entrepreneurial posture), it is difficult to propose any other strategies (except the market avoidance one) to cope with such environments. Thus, additional research which will focus on hostile environments and which will incorporate alternative postures and strategies is necessary. Such a research will be able to identify the best posture and strategies (including the option of market avoidance suggested earlier) to deal with hostility. As the positive relationship between entrepreneurial posture and export performance was established in this study, factors that encourage or discourage the development of such posture gain practical importance for exporters. Our study showed that entrepreneurial posture is more influenced by the internal environment rather than the external environment. In particular, organic structures are strongly related with entrepreneurial posture. Thus, exporters wishing to become entrepreneurial, need to make sure that they also develop an organic organisational structure. Findings also helped to resolve the controversy related to the relationship between a firm’s size and entrepreneurial posture. In general, the relationship between the two is not a straightforward one. The study indicated that size is favourable for the development of entrerpreneurial postures but, at the same time, inhibits the development of organic organisational structures. As organic structures have a strong positive effect on the adoption of an entrepreneurial posture, size appears to have an indirect negative effect on entrepreneurial posture. It appears that organisational structure moderates the relationship between size and entrepreneurship. Thus, exporters need to be of sufficient size to be able to become entrepreneurial but at the same time they need to develop an organic organisational structure. The study throws some light on the reported inconsistencies of past research regarding the relationship of size with entrepreneurial postures. However, similar to other empirical studies, our study examined only the existence of linear relationships between the two. Thus, with such an approach it is difficult to identify the optimum size of a firm for the development of entrepreneurial posture. Future studies should employ other analytical approaches to examine the possibility of a non linear relationship. Finally, the export market environment was found to exert limited influence on the development entrepreneurial posture. Only firms operating in dynamic exportmarket environments, (i.e. environments which are characterised by frequent changes) tend to develop entrepreneurial postures. It appears that only environmental dynamism can sufficiently motivate exporters to develop an entrepreneurial posture. However, our study failed to establish that the development of an entrepreneurial posture in dynamic environment results in higher performance than that of firms operating in static environments. Thus, we can advocate that entrepreneurship is the best response to environmental dynamism. 248 G.I. Balabanis, E.S. Katsikea / International Business Review 12 (2003) 233–252 It also appears the other characteristics of the environment (i.e. diversity and hostility) do not exert sufficient pressure to trigger an entrepreneurial response. However, it is likely that exporters react to the other types of environments (diverse and hostile environments) by adopting different types of postures that are not examined in this study. For example, Hart and Banbury. (1994) suggested that firms operating in diverse environments will adopt a rational or analytical posture, because it is important for them to understand the diverse elements of such environments before they develop strategies. Future research should examine other complementary or competing postures that a firm can adopt (Hart & Banbury 1994) to deal with environmental hostility, dynamism and diversity. Only a comparison of the different postures and their effects on export performance will allow us to make suggestions regarding what is the best posture under different environmental conditions (McArthur & Nystrom, 1991; Priem et al., 1995). 6. Limitations and future research avenues The reader needs to be aware of certain limitations that might inhibit the generalisation of the results to exporters operating under different conditions and help the interpretation of the above results. First, all the exporters participating in the study are British, operating in the same domestic business environment. For example, Zahra et al. (1997) found that domestic environments have a significant impact on both entrepreneurial orientation and export performance. Thus, findings may not be directly applicable to exporters of other countries. Second, although export performance was based on a multi-item measure commonly used in entrepreneurial studies (Murphy et al., 1996; Dess et al., 1997) it does not include many of other dimensions identified in the export literature (i.e. Matthyssens & Pauwels, 1996; Styles, 1998; Katsikeas, Leonidou & Morgan, 2000; Leonidou, Katsikeas & Samiee, 2002). Future research should examine the impact of entrepreneurial posture on different dimensions of export performance. Third, the small powered sample prevented us from using the full information model in the analysis. Specifically, measurement errors of the main constructs were not incorporated in this study due to sample limitations. Fourth, in line with similar empirical studies on entrepreneurship (Covin & Slevin, 1988; Zahra, 1991; Covin, 1991; Herron & Robinson, 1993; Miles, Arnold & Thompson, 1993; Smart & Conant, 1994; Zahra & Covin, 1995; Morris & Lewis, 1996; Zahra et al., 1997; Dess et al., 1997; Caruana et al., 1998; Zahra & Neubaum, 1998) a parsimonious modelling approach was followed. The study focused on a number of factors that affect entrepreneurial posture and export performance. 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