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40 Journal of International Marketing

Statistics from the World Resources Institute showthat not only do services represent a significantpercentage of the gross domestic product glob-

allyapproximately 72% for high-income countriesbut this percentage is steadily increasing annually(World Resources Institute 2008). More important, aca-demics have widely acknowledged an emerging para-digm shift from goods-oriented to services-orientedlogic in marketing thinking and practice (Fang,Palmatier, and Steenkamp 2008; Grnroos 2000; Vargo

and Lusch 2004). This is a culmination of the increasingemphasis that the field places on service quality and

competitive advantage. In a parallel vein, enhanced bythe widespread use of information technology and wire-less telecommunications, services have gained preva-lence in the manufacturing sector, accounting for a

increasingly important component of the overall offer-ing (World Investment Report 2004).

Manufacturing firms operating internationally face aplethora of strategic and institutional challenges andmust relentlessly seek ways to improve their perform-ance in the overseas markets. Although not unattain-able, competing on the basis of a low-cost offering over-seas is particularly difficult when the manufacturingfirm is based in a high-income country. Researchers

have anticipated that the most profitable strategies placesubstantially greater emphasis on the achievement of

differentiation advantage (MacMillan and McGrath1997). Of the two main paths to differentiationnamely, products and servicesthe latter has been

When Exporting ManufacturersCompete on the Basis of Service:

Resources and Marketing CapabilitiesDriving Service Advantage andPerformance

Anna Kaleka

ABSTRACT

Because services account for an increasingly large percentage of the gross domestic product globally, achieving competi-tive advantage in the international markets depends to a great extent on the level of service the firm offers to its cus-

tomers. Focusing on exporting manufacturers, this study draws from the resource-based view of the firm to develop

and test a model of those key resources and capabilities that drive service advantage in the overseas markets. The

author finds that exporting experience nurtures customer relationships and informational capabilities, and availability

of finance facilitates informational and product development capabilities and enables exporters to achieve service

advantage and superior venture performance in the overseas markets.

Keywords: competitive advantage, service, export performance, resource-based view, marketing capabilities

Journal of International Marketing

2011, American Marketing Association

Vol. 19, No. 1, 2011, pp. 4058

ISSN 1069-0031X (print) 1547-7215 (electronic)

Anna Kaleka is a Reader in Marketing and Strategy, CardiffBusiness School, Cardiff University (e-mail: [email protected]).

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past three decades. Service quality is defined as the cus-tomers assessment of the level of service the firm pro-vides compared with their expectations. Its most wide-spread measurement instrument, SERVQUAL, embracesdimensions such as reliability, responsiveness, assur-ance, empathy, and tangibles (Zeithaml and Bitner

2000). It is not surprising that the relevant literature haszealously examined customer satisfaction as both adeterminantal (Bolton and Drew 1991) and a direct(Brown and Lam 2008) outcome of service quality. Withthe focus on customer satisfaction, the assessment ofservice quality has involved comparison of preconsump-tion expectations with postconsumption perceptions(Parasuraman, Zeithaml, and Berry 1988; Rust et al.1999). From a process perspective, researchers viewed

service quality as comprising three dimensions: (1) inter-action quality, which comprises customer evaluations ofthe interpersonal interactions that take place during ser-vice delivery; (2) physical environment quality, which

refers to the surrounding environment potentially affect-ing customer service evaluations; and (3) outcomequalityalso called service product (Rust and Oliver1994)or what the customer is left with after the deliv-

ery of the service (Brady and Cronin 2001). It is worthnoting that the research streams mentioned previouslyhave largely built on qualitative and quantitativeresearch on service firms.

In the case of manufacturing firms, order fulfillment andphysical distribution have a key role in that they can addor subtract value from the firms marketing efforts

(Bienstock, Mentzer, and Bird 1997; Bowen, Siehl, andSchneider 1989; Porter 1980). A relevant construct islogistics service quality, which originally emerged in theoperations literature and has changed over time toreflect evolution in the definition of logistics from purelyphysical distribution to include other value-addingactivities, such as packaging, inventory management,and information technology (Mentzer, Gomez, andKrapfel 1989). It has also been the focus of marketingstudies, and similar to service quality, it has been defined

as reflecting customer perceptions of the firms servicedelivery across different dimensions, with customer sat-

isfaction as the authenticating outcome (Mentzer, Flint,and Hult 2001; Perrault and Russ 1974). Logistics ser-vice quality has been conceptualized as a stage model ofthe order fulfillment process, comprising order place-ment and order receipt. At the order placement stage,customer evaluations relate to personnel contact quality,

order release quantities, information quality, and order-ing procedure quality, and at the order receipt stage the

key factors driving satisfaction are customer perceptionsof order accuracy, condition, and quality, as well astimeliness and order discrepancy handling (Mentzer,Flint, and Hult 2001; Mentzer, Flint, and Kent 1999).

There are important differences between the latter two

constructs and service advantage. First, while all threeconstructs reflect customer perceptions, service qualityand logistics service quality imply that the customershave actually experienced the service offering (Reevesand Bednar 1994). This is not necessarily the case withservice advantage. First, service advantage allows for thedevelopment of perceptions based on often-unfoundedinformation available in the market (i.e., word ofmouth). Second, service advantage explicitly takes com-

petition into consideration. The prevalent competitors,who are easily retrievable from customers memories,are supposed to form the frame of reference for cus-tomer judgments. This is not necessarily the case with

service quality, which has been exceedingly customerfocused (Cronin and Taylor 1992; Parasuraman, Zeit-haml, and Berry 1988, 1994), though there has been atleast one study that has taken competition into consid-

eration in the definition and measurement of the con-struct (i.e., Babakus, Bienstock, and Van Stotter 2004).

Service Advantage in an International Context

Achieving positional service advantage in internationalmarkets poses additional challenges to the manufactur-ing firm, mainly due to cultural distance and differences

in the institutional environment of the countries partic-ipating in an international venture (Brouthers, Brouthers,and Werner 2008). For example, a manufacturers effortsto offer timely delivery of ordered goods could beseverely compromised in a country in which the com-munications infrastructure is defective or unreliable orpunctuality is not a typical characteristic of everydaytransactions. More important, these characteristics arenot likely to affect all competitors in the same waybecause local firms and those that are culturally similar

would be more knowledgeable and therefore at easewhen developing appropriate strategies and coping

mechanisms. Nonetheless, the international business lit-erature has devoted scant attention to the role of ser-vice in establishing and maintaining successful ventureswith overseas partners.

Service advantage largely designates end users percep-

tions of the service they receive when buying the prod-uct. Focusing on manufacturers employing overseas dis-

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Competing on the Basis of Service 43

tributors, it is also the case that these perceptions reflectthe extent of the exporters support in enabling its dis-tributor to fulfill end-user requirements. It is a surrogateof end users perceptions of the extent to which themanufacturerthrough the distributormeets theirservice needs relative to competition. Overseas cus-

tomers require availability of and easy access to theproducts, and they expect support both during and afterthe sale (Asugman, Johnson, and McCullough 1997;Lele and Karmarkar 1983; Marr 1987) and, possibly, anadequate variety of products within a specific productline. Although the manufacturer can ensure a satisfac-tory product range that is readily available to beexported, the distributor is in charge of providing physi-cal fulfillment servicesthat is, activities necessary for

the manufacturer to process orders from the specificmarket (Balabanis 2000; Bello and Verhage 1989). Insummary, a manufacturing firms service-differentiatedposition in the export venture market will ultimately be

assessed on product accessibility, superior pre- and post-sales support, timeliness, and reliability of delivery(Porter 1980).

Exporting manufacturers typically have different dis-tributors in the various markets in which they operateand face different assortments and intensity of competi-tors; moreover, these markets score differently withregard to several cultural and institutional characteris-tics. Overseas customers are likely to vary in theirframes of reference and levels of expectations withregard to the manufacturers service offering, and it is

likely that this manufacturers position of service advan-tage will vary across target markets (Marr 1987). There-fore, it seems likely that more insights can be gained bystudying service advantage, its dimensions, and key fac-tors that influence it at the export venture level.

The Model

Figure 1 presents the conceptual model of the study. Theachievement of service advantage in the export venture

market is depicted as contributing to the ventures eco-nomic performance. Then, in line with the RBV (for

reviews, see Lockett, Thomson, and Morgenstern 2009;Newbert 2007), the locus of interest is on the idiosyn-cratic firm factors that enable the exporting manufac-turer to offer the chosen distributor support in deliver-ing superior customer service in the venture market.Two broad exporting-related organizational resources

financial and experientialare deployed via three firmcapabilities: (1) the product development capability,which allows for the development of products easily

delivered and serviced; (2) the ability to acquire valuableexport market related information; and (3) the ability todevelop good relationships with customers in the exportventure market. Although it could be argued that otherfirm-controlled factors exist at a higher level of speci-ficity (e.g., inventory management, packaging, inter-

functional coordination, quality control, informationtechnology capabilities) as potential determinants of ser-vice advantage, the adopted set of capabilities representat a molar level the main market-facing processes(Ramaswami, Srivastava, and Bhargava 2009), and thetwo resources provide a fair surrogate of the firms crys-tallized export-related assets. It is a comprehensive,albeit parsimonious, set, and testing its impact on ser-vice advantage could point to the appropriate area of

service-enhancing activities that could benefit fromadditional managerial and research attention.

Service Advantage and Export Venture

Performance

The recent marketing and strategy literature is repletewith references, albeit mostly speculative, to a direct

positive relationship between positional competitiveadvantage and performance (Powell 2001; Powell andArregle 2007). Empirical evidence from new productdevelopment studies has shown that differentiationadvantage is positively related to product and marketperformance (Song and Parry 1997; Li and Calantone1998). McDougall and Levesque (2000) find a positiverelationship between customer perceived value, a con-

cept underlying competitive advantage (Woodruff 1997;Zeithaml 1988), and customer satisfaction and loyalty,and Ketchen and Hult (2007) argue that superior valuesupply chains, focusing on speed, cost, quality, andflexibility, enhance their firms performance. In a relatedvein, the service quality and logistics service quality lit-erature streams provide clear suggestions of a positiverelationship between service quality and customer satis-faction and loyalty (Babakus, Bienstock, and Van Scot-ter 2004; Bolton and Drew 1992; Heskett, Sasser, and

Schlesinger 1997; Mentzer, Flint, and Hult 2001), whichin turn are prime determinants of long-term financial

performance (Heskett et al. 2008). However, although aconsiderable number of studies have found thatimprovements in service quality and customer satisfac-tion lead to improved firm performance (Anderson, For-nell, and Lehman 1994; Cronin, Brady, and Hult 2000;Fornell 1992), there is also suggestion of a negative

effect (Reeves and Bednar 1994). Various explanationscan be offered, ranging from costs associated with suchimprovements, which can account for a shortfall in

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44

JournalofInternationalMarketing

Experiential

Resources

InformationalCapability

Product

Development

Capability

Financial

Resources

Customer

Relationship

Capability

Service Advantage

H2 (+)

H3 (+)

H4 (+) H5 (+)

H6 (+)

H7 (+)

H8 (+)

H9 (+)

Figure 1. Conceptual Model and Hypotheses

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profitability, to the intensity of competition, which candrive prices down and reduce the margins of all com-petitors. A similar logic can be applied to the relation-ship of service advantage to performance. When cus-tomer perceptions place the service offering of the firmat a high level relative to competitors, it is likely that

customers will be inclined to buy the product, providedthat taxing environmental conditions have not deprivedthem from their capital. Therefore, it can be expectedthat the sales and market share of the firm will increase,and to the extent that employee remuneration and otherexpenses are carefully managed (cf. Coff 1999), prof-itability should also increase.

In exporting, in which the concept has been scantly

studied, service quality emerged as a direct antecedent ofexport performance in an exploratory study of Euro-pean managers (Lages, Lages, and Lages 2005). Serviceadvantage, as a component of the overall competitive

advantage, has been shown to be positively associatedwith export venture performance (Morgan, Kaleka, andKatsikeas 2004), and recently, Ha-Brookshire and Dyer(2009) have found a positive association of service

advantage with the firms relationship performance withforeign business partners. Therefore, it seems that thereare sufficient grounds to hypothesize the following:

H1: The realization of service advantage in anexport market is positively associated withexport venture performance in that market.

The Role of Export Marketing Capabilities

Combining theoretical insights from the RBV and theincreasingly relevant dynamic capabilities approach(Teece, Pisano, and Schuen 1997; Makadok 2001),marketings contribution to overall firm aptitude todeliver superior customer service relative to the compe-tition and achieve service advantage mainly refers tothe role of specific firm capabilities in effectivelydeploying and updating existing resources. Although an

array of capabilities interact, combine, and integrate toachieve service advantage (Eisenhardt and Martin

2000), those that have a key role are organizationalprocesses pertaining to market information acquisition,or enabling the firm to learn what customers want andwhat alternative offers are available in the market; cus-tomer relationship development and maintenance, orallowing for a steady influx of customer and market

related information and ensuring that there is an ongo-ing dialogue with the customer; and product develop-ment, or making it feasible for the firm to incorporate

customer wants in the product features (Ramaswami,Srivastava, and Bhagrava 2009).

At the core of the typical manufacturing company is itsproduct development capability, which must be main-tained and continuously upgraded to satisfy and antici-

pate customer needs. Exporters that have adaptablemanufacturing processes in place are in a good positionto adjust product design to incorporate distributorrequests for specific product features (Calantone et al.2004). They can then develop products that are easierto support and service after the sale, enhancing theirown and their distributors position with end users.Innovative product development processes are alsolikely to allow a certain level of flexibility (Kelley

2009). Adjustments in the production processes canhave positive effects on production volume and rateand, subsequently, product availability, delivery speed,and reliability. As for service firms, the literature is

largely supportive of a positive relationship betweeninnovation and performance (Agarwal, Erramilli, andDev 2003; De Brentani and Kleinshmidt 2004). There-fore, for exporting manufacturers placing competitive

emphasis on their service component, the following ishypothesized:

H2: The level of product development capabilityan exporting manufacturer possesses is posi-tively related to achieving service advantage inthe export venture market.

Market information acquisition capability involvesinformation on both market components: customersand competitors (Narver and Slater 1990). It is relatedto market intelligence generation, export assistance, andmarket research processes that aim to improve firmunderstanding of the dynamics of the particular exportmarket (Leonidou and Theodosiou 2004; Souchon andDiamantopoulos 1996). Typically, informational capa-bility, as an outside-in process, does not directly leadto a position of competitive advantage. It informs and

complements other inside-out processes, such aslogistics integration and product development, whose

outputs are more easily assessed by the market, poten-tially leading to competitive advantage (Day 1994).

Exporting manufacturers that possess superior informa-tional capability relative to competitors are more likelyto develop broader and more accurate knowledge of the

overseas market structure, enabling them to developproducts that fill gaps in the market or add features thatbetter match customer requirements (Toften and Rustad

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2005). Importantly, they are expected to sense marketchanges earlier than their counterparts and thus havemore time at their disposal to plan their response (cf.Capron and Chatain 2008). To the extent that exportmarketrelated knowledge surpasses inertia and func-tional boundaries and is disseminated within the organ-

ization, the following is hypothesized:

H3: The level of informational capability the ex-porting manufacturer possesses is positivelyrelated to its level of product developmentcapability.

Customer relationship capability covers processes thatpertain to the establishment and maintenance of good

relationships with overseas distributors and, when feasi-ble, end users (Mentzer et al. 2001). As exporting manu-facturers develop their ability to acquire export marketinformation, they tend to develop a more accurate pic-

ture of the overseas market and its particularities.Importantly, they can obtain better insights into the dif-ficulties the distributor faces and the resources andeffort needed to overcome them. Often, the distributor

and its ties to local institutions are the main sourcesfrom which the firm can obtain information on competi-tive tactics and planned new product introductions inthe particular market (Bonner and Walker 2004;McEvily and Zaheer 1999). The distributor-sourcedinformation on competitive moves, end-user comments,and product-related requests contributes to developing amutual understanding of the situation and points to the

need for further communication and cooperation. Thisis often enhanced by the familiarity developed betweenemployees of partnering firms (Boddy, Macbeth, andWagner 2000; Luo 2001). Therefore, the manufacturersability to develop enduring relationships with the dis-tributor will be strengthened, and to the extent thatthere is accuracy in the information flow and consis-tency in responding to market signals, their relationshipwith end users will also be strengthened. Thus, the fol-lowing is hypothesized:

H4: The level of informational capability the

exporting manufacturer possesses is positivelyrelated to its level of customer relationshipcapability.

While provision of customer service could happen in aformalized, systematized and impersonal manner, the

human element and temporal continuity that differentiatevalue-adding relationships from discrete transactions canhave a key role (Luo 2001; Ulaga and Eggert 2006; Vargo

and Lusch 2004). To elaborate on previous arguments,close customer relationships provide the frame for moreeffective communication of distributor and end-user com-ments, complaints, and desires to the exporting manufac-turer, offering them the opportunity to respond. Further-more, through ongoing interaction, the exporting

company develops a more holistic picture of the venturemarket (Bello, Chelariu, and Zhang 2003), is better ableto predict incoming order volume, and can ensure smoothorder fulfillment. Close relationships with the distributorhelp the manufacturer develop an understanding of thelevel of importance that the end users in the specific mar-ket attribute to after-sales service. Then, it is more likelythat the exporting firm will actually offer that service(Asugman, Johnson, and McCullough 1997). Therefore,

the following hypothesis is offered:

H5: Possession of a high level of customer relation-ship capability is positively related to achiev-

ing service advantage in the export market.

Firm Resources as Capability Enablers

Firm capabilities are nurtured by resources, those firm-controlled assets that enable organizational processes toflow (Dierickx and Cool 1989). For exporting manufac-turers, financial resources available for exporting activi-ties are critical for the effective development and mainte-nance of various organizational capabilities, particularlythose that are known to incur substantial costs. Exam-ples of such capabilities are the acquisition of critical

export market information and product developmentcapability.

Financial slack enables the firm to devote time and allo-cate funds to traveling and making contacts in the over-seas market, acquiring and/or collecting data on com-petitors and their products, and spending time with thedistributor and end users to obtain a fair picture of theirrequirements. Although many of these activities couldlargely be carried out in alternative, less resource-

consuming ways, such as through electronic communi-cation and the Internet, the availability of finance allows

greater flexibility and increases the possibility of theexporter taking advantage of emerging opportunities(George 2005). Thus, the following is hypothesized:

H6: The level of financial resources the exportingfirm possesses is positively related to the level

of informational capability that the firmdeploys in the export market.

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An area that is known to demand substantial financialcapital is product development. Developing new prod-ucts and improving or adapting the features of existingones requires investments in human capital, equipment,and often substantial, notoriously costly process alter-ations (Clark and Fujimoto 1991; Zahra and Nielsen

2002). This is particularly true for the processesinvolved in the development and adjustment of prod-ucts to meet perceived and manifest needs of overseascustomers. Such needs are characterized by uncertaintydue to geographical and cultural distance and oftenrequire that the manufacturer retains substantial flexi-bility in the manufacturing process (Eisenhardt andTabrizi 1995; Tatikonda and Montoya-Weiss 2001).Financial resources devoted to export-related activities

can facilitate such processes and allow for experimen-tation and potential errors. Thus, the following ishypothesized:

H7: The level of financial resources the exportingfirm possesses is positively related to the levelof product development capability that thefirm deploys in the export market.

A firms experiential knowledge is a valuable, complex,and difficult-to-imitate company resource. It takes timeto build and is the result of the combination and integra-tion of various other resources and capabilities (Zolloand Winter 2002). Manufacturers with substantialexport involvement can use the accumulated knowledgefrom decisions, actions, and errors committed in the

past to inform market search for opportunities andmake contacts in new venture markets (cf. Pfeffer andSutton 2006). Over time, it is likely that they will iden-tify key channels of information acquisition, resulting inbetter quality and continuous information flow.Nonetheless, there are opposing arguments. Experien-tial knowledge may trigger overconfidence and attach-ment to the extant ways of carrying out informationsearch, resulting in myopia in identifying potential cus-tomer segments and valuable sources of information in

new markets (Petersen, Pedersen, and Lyles 2008).However, these last arguments are more relevant to the

quest for opportunities in completely new markets. Interms of export ventures that are already running, theemphasis is on the exploitative aspect of informationacquisition capability in the specific overseas market.Asugman, Johnson, and McCullough (1997) show thatfirms in relatively advanced stages of internationaliza-

tion, which are likely to score high in experientialknowledge, perceive export customer service as a strate-gic tool. Therefore, they are more likely to seek market-

related information on customer needs (Marr 1987).Overall, the following is hypothesized:

H8: The level of experiential resources the export-ing firm possesses is positively related to thelevel of informational capability the firm

deploys in the export market.

At the beginning of a manufacturing firms involvementin export ventures, there is a risk that it will exclusivelyfocus and build on elements of the relationship with thedistributor that the managers recognize, failing toappreciate relationship aspects they are unfamiliar withand misinterpreting the unknown as something familiar(e.g., confusing social networks with guanxi [Nguyen

and Rose 2009]). However, firms that are involved indifferent export ventures or those that have been run-ning for several years are likely to develop an under-standing of the overseas distributor and end users

behavioral patterns and idiosyncrasies. They developexperiential knowledge, which is particularly impor-tant in connection with activities that are based on rela-tions to other individuals (Johanson and Valhne 1977,

p. 28). Then they can capitalize on similarities andacknowledge and accommodate differences while devel-oping and nurturing relationships with overseas dis-tributors (Bello, Chelariu, and Zhang 2003). For exam-ple, experiential knowledge of different signals andbehavioral patterns as expressions of trust, commit-ment, or opportunism could lead to greater confidencein the future of the relationship, allow for early problem

detection, and activate corrective mechanisms leading tohigher relationship quality (Cullen, Johnson, andSakano 2000; Mehta et al. 2006). Therefore, the follow-ing is hypothesized:

H9: The level of experiential resources the export-ing firm possesses is positively related to thelevel of customer relationship capability thatthe firm deploys in the export market.

RESEARCH METHOD

Exploratory Interviews

At the model development stage, a researcher who hadsubstantial working experience with an electronic goodsdistributor conducted 13 in-depth interviews with chiefexecutive officers, marketing managers, and international

business development managers of companies from across-section of industries. During a discussion of theirstrategic moves in establishing new export ventures and

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improving their competitiveness in existing ones, theresearcher encouraged respondents to focus on those pro-cesses in their organization that enabled them to differen-tiate their offerings in their export markets. The resultswere discussed in focus groups with executive MBA stu-dents with different levels of international experience.

Unit of Analysis

In designing the questionnaire, a key decision was that ofthe appropriate level of analysis. Taking into considerationthe theoretical framework adopted in this study, the spe-cific venture was selected. The adoption of export ventureas the unit of analysis (Ambler, Styles, and Wang 1999;Cavusgil and Zou 1994; Lages, Jap, and Griffith 2008;

Morgan, Kaleka, and Katsikeas 2004) was deemed to beappropriate because firms often export different productsin the same export market and achieve different positionaladvantages for the same product in different export mar-

kets. The export venture was explicitly defined as theexporting of a specific product/line to a specific country,and the respondents were asked to select and brieflydescribe an export venture of which they were knowledge-

able and that had been running for at least three years. Theventure product should have been imported and sold by alocal distributor. The respondents were also explicitlyinstructed to avoid a venture market in which their onlycustomers were manufacturing firms.

Sample and Data Collection

One thousand ninety-three U.K.-based exporting manu-facturers were randomly selected from the Dun & Brad-street directory. They were manufacturers of both indus-trial and consumer goods from a cross-section ofindustries, employing up to 500 people. Each companywas initially contacted by telephone to confirm involve-ment in export activities, verify its postal address, andidentify the most appropriate person to whom the ques-tionnaire should be addressed. Eight hundred eighty-seven companies met the research design requirements

and were the recipients of the study questionnaire. Inline with Dillmans (1978) total design method in

administering the data collection process, an initialmailing of the questionnaire was followed by areminder/thank-you postcard to all respondents and asecond and a third mailing to nonrespondents three andseven weeks later, respectively. The cover letters stressedthe significance of the study, the importance assigned to

the respondents contribution, and the confidentialtreatment of the data. This process resulted in a total of312 responses, or a 35.3% response rate.

Approximately 12% of participating firms had beenexporting for up to 5 years, 23.1% had been exportingfor 610 years, 28% had been exporting for 1120years, 31.2% had been exporting for 2150 years, and5.8% had been exporting for more than 50 years. Interms of overseas markets of operation, 7.5% were

exporting to 13 markets, 11.5% were exporting to 47markets, 23% were exporting to 815 markets 25.9%were exporting to 1630 markets, 21.6% were export-ing to 3160 markets, and 10.5% were exporting tomore than 60 markets.

As for the export ventures they selected, approximatelyhalf of the participating firms (50.48%) were exportingto European Union countries, 13.50% were exporting to

the United States and Canada, 3.22% were exporting toJapan, 4.18% were exporting to other developed coun-tries, 3.54% were exporting to exEastern Europeanblock countries, 16.72% were exporting to developing

countries, and 7.40% were exporting to newly industri-alized countries. Of these ventures, 58% were active forup to 5 years, approximately 25% were active for 610years, 13.4% were active for 1120 years, and just over

3% were active for more than 20 years.

Nonresponse bias was assessed by comparing severalcharacteristics of early and late respondent firms (i.e.,years exporting, sales volume, and number of employ-ees), as well as with regard to the study constructs. Allcomparisons revealed no significant differences be-tween the two groups (p < .05), providing grounds to

assume that nonresponse bias was not an issue of fur-ther concern.

Construct Measurement

Export Venture Performance. Because of the multitudeof issues associated with performance measurement ininternational contexts (Hult et al. 2008), export ventureperformance was operationalized as a formative con-struct identified through measurement relationships

(Jarvis, Mackenzie, and Podsakoff 2003, pp. 21315).The formative part consisted of three items: export mar-

ket share, export venture profitability, and revenue fromproducts introduced in the venture market in the pastthree years, representing effectiveness, efficiency, andadaptability, respectively (Walker and Ruekert 1987).Respondents rated their firms performance on theseitems in comparison with their main competitors in the

specific market. Seven-point scales were used, anchoredby much worse and much better. The two reflectiveindicators were overall assessment of export venture

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performance in the past year and overall assessment ofthe extent to which company objectives for this exportventure were achieved in the past year. For the formerreflective indicator, the seven-point scales wereanchored by poor and excellent, and for the latter,the seven-point scales were anchored by not at all

achieved and completely achieved.

Service Advantage. Service advantage was also operation-alized as a formative construct identified through meas-urement relationships. Exporting manufacturers providedan assessment of how their offerings would compare withthose of their main competitors in the overseas markets interms of product accessibility, technical support and after-sales service, and delivery speed and reliability. To achieve

identification, two reflective indicators were added:Exporting manufacturers were asked how the end userswould rate their offering in the export venture marketcompared with those of their main competitors in terms of

service quality and overall satisfaction with service offer-ing. Seven-point scales, anchored by much worse andmuch better, were used for all questions.

Resources and Capabilities. The measures for these con-structs were adapted from Morgan, Kaleka, and Kat-sikeas (2004). With regard to the measurement of experi-ential and financial resources and informational productdevelopment and customer relationship capabilities,respondents assessed their companys position with

respect to several items (ranging from two for financialresources to five for informational capabilities) comparedwith main direct competitors in the overseas venture mar-kets. Table 1 describes the items, which largely emergedfrom a review of the pertinent exporting literature andwere enriched with the input derived from the

exploratory interviews. Respondents answers were cap-tured on seven-point scales anchored by much worseand much better. The relative assessments of resourcesand capabilities were deemed to be necessary for two rea-sons. First, they are in accordance with the RBV, in whichcompetitors constitute the frame of reference in character-izing the sources of competitive advantage as valuable,rare, inimitable, and nonsubstitutable (Barney 1997). Sec-ond, during the exploratory interviews, it was evident

that when the frame of reference was made explicit , man-agers were more motivated to provide accurate responses.

Scale Validation

Scale reliability was assessed by calculating Cronbachsalpha coefficients for all resources and capabilities. Allalphas were higher than .70. Composite reliabilities ()

were also calculated for all constructs with multipleindicators, and they were all higher than .70.

Subsequently, the scales were subjected to confirmatoryfactor analysis to assess their convergent and discrimi-nant validity. One measurement model was assessed that

Table 1. Descriptives and Correlation Coefficients

Construct 1 2 3 4 5 6 7

1. Experiential resources .69

2. Financial resources .25** .87

3. Informational capability .55** .21** .69

4. Customer relationship capability .54** .15* .62** .69

5. Product development capability .24** .27** .35** .30** .68

6. Service advantage .37** .30** .34** .40** .31**

7. Export venture performance .45** .19** .39** .39** .32** .33**

M 4.95 4.18 4.49 5.45 4.95 5.02 4.74

SD 1.20 1.45 1.05 .97 1.08 .85 1.03

N 308 309 305 308 307 297 303

*p < .05.**p < .01.Notes: Square root of average variance extracted for the multiple indicatorreflective constructs is on the diagonal.

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included all main model constructs. Table 2 shows theresults. The statistics reveal acceptable levels of fit, andall factor loadings are large and significant at the .01level, providing evidence of convergent validity. Toassess the discriminant validity of the scales, two pairfactor models were estimated with all possible pairs of

constructs and the difference in chi-square values for theconstrained and unconstrained model were calculated.All chi-square difference values were higher than thecritical value of 3.84 (significant at the 5% level),strongly supporting discriminant validity. An alternativemethod of assessing discriminant validity (Fornell andLarcker 1981) was also employed. Comparison of aver-age variances extracted (AVEs) with the shared variancebetween pairs of constructs (equal to the squared corre-

lation between the two constructs) revealed that AVEwas higher than the related shared variance in all cases,further indicating discriminant validity. Table 1 reportsthe square roots of the AVEs of the study constructs on

the diagonal.

To test whether common method bias is a potential threatto data analysis and interpretation, Harmons one-factor

test was adopted (Podsakoff and Organ 1986). Anexploratory factor analysis was run constraining thenumber of factors to one. The single-factor solutionexplained 31.47% of the variance in the data. An uncon-strained exploratory factor analysis resulted in a solutionexplaining 66.06% of the data variance, while the firstfactor explained only 16.32% of the variance (well belowthe 25% cutoff point commonly used when performing

such tests). Therefore, there are grounds to assume thatcommon method bias is not cause for concern with thisdata set.

Harmons test also complemented various other pre-cautionary measures taken during the questionnairedesign stage. More specifically, the predictor and crite-rion variables were separated in the questionnaire. Fol-lowing the definition of the export venture and the invi-tation to select a specific venture for reference,

questions relating to service advantage were asked.Subsequently, the attention shifted to within the

respondents organization, with questions on resourcesand capabilities and, finally, performance-related ques-tions. Several overall evaluation questions for differentmodel constructs were placed at the end of the ques-tionnaire. Moreover, the respondents were guaranteedanonymity, and they were invited to select a venture of

their choice, of which they were knowledgeable andhad been running for at least three years, independentlyof its degree of success.

FINDINGS

Drawing on the RBV, this study focuses on exportingmanufacturers offering customer service as a key com-ponent of their offerings in the overseas markets. Itexamines the role of two firm resources and three capa-

bilities as antecedents of service advantage and the effectof service advantage on export performance of activeexport ventures. The study constitutes a preliminaryattempt to develop and empirically evaluate an integra-tive explanatory framework for the achievement of ser-vice advantage in international markets.

In an initial data analysis, means, standard deviations,and intercorrelations were estimated for the main study

(see Table 1). Next, the study hypotheses were testedusing structural equation modeling. Table 3 reports theresults of the tests. An overall, multifaceted assessment ofthe main model generated a favorable and adequate fit of

the observed data to the conceptual model (2(285) =613.40,p < .001; normed fit index = .92; comparative fitindex = .95; and root mean square error of approxima-tion = .06). Subsequently, with regard to the main model

results, an examination of the standardized beta coeffi-cients and t-values of the studied relationships revealedthat the data supported all hypotheses relatied to themain model. Service advantage is positively related toexport venture performance (b = .210, t-value = 3.18)and is positively influenced by product development (b =.227, t-value = 3.13) and customer relationship (b = .257,t-value = 3.48) capabilities. Informational capability also

has a positive effect on customer relationship capability(b = .510, t-value = 5.95) and product development capa-bility (b = .322, t-value = 4.34). Experiential resourceshave a positive impact on both customer relationship (b =.350, t-value = 4.56) and informational (b = .530, t-value = 6.83) capabilities, and financial resources havea positive effect on product development capability (b =.211, t-value = 3.13) and on informational capability(b = .125, t-value = 2.02). The model explains 38% of theservice advantage variance and 47% of the export ven-

ture performance variance.

DISCUSSION

As a response to calls for more focused research on thespecific types of resources and capabilities that determinecompetitive advantage in international markets (Meyer

and Peng 2005), this study developed and tested a com-prehensive explanatory model of essential resources andcapabilities that determine the achievement of service

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Table 2. Confirmatory Factor Analysis Results

Construct Standardized Factor Loading t-Value

Experiential Resourcesb .76 .73

Knowledge of export venture market .516 a

Length of firms export experience (years) .866 10.387

Number of export ventures the firm has been involved in .869 7.175

Financial Resourcesb .95 .86

Availability of financial resources for use in export activities .906 a

Availability of financial resources for use in the export venture .988 31.446

Informational Capabilityb .87 .81

Identification of prospective customers .691 a

Capturing important market information .700 9.972

Acquiring export market related information .839 11.677

Making contacts in the export market .836 11.640

Monitoring competitive products in the export market .664 9.487

Product Development Capabilityb .75 .71

Development of new products for our export customers .864 a

Improvement/modification of existing products .822 10.387

Adoption of new methods/ideas in manufacturing process .488 7.162

Customer Relationship Capabilityb .81 .72

Understanding overseas customer requirements .735 a

Establishing and maintaining close customer relationships .744 10.808

Establishing and maintaining close distributor relationships .774 10.928

Service Advantage (Formative)

Product accessibilityb

Technical support and after-sales serviceb

Delivery speed and reliabilityb

Overall end customer rating of service qualityc .691 a

Overall end customer satisfaction with product, service offeringc .942 7.717

Export Venture Performance (Formative)

Market share over past 12 monthsb

Profitability over past 12 monthsb

Revenue from products introduced over past three yearsb

Overall performance assessment over past 12 monthsd .844 a

Overall achievement of company objectives for venturee .819 8.348

Fit Indexes

2 = 286.83 , d.f. = 150 ,p = .000; normed fit index = .94; comparative fit index = .97; and root mean square error of

approximation = .056

at-values for these parameters are not available, because they were fixed for scaling purposes.bCompared with main competitors in the ventures market, anchored by much worse and much better.cEnd customer rating of the firms performance in the export venture market compared with main competitors, anchored by much worse and much better.dAnchored by poor and excellent.eAnchored by not at all achieved and completely achieved.

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advantage and export venture performance. In the morespecific exporting context, the study can be viewed as acontinuation of the scantly populated but importantresearch stream on the use of service as a strategic toolfor internationally involved manufacturing companies(Asugman, Johnson, and McCullough 1997; Lele andKarmarkar 1983; Marr 1987). Confirming the RBVsclaims, the achievement of service advantage in the

export venture market emerged as the result of the inter-play of accumulated experiential knowledge, financialresource, informational, customer relationship, andproduct development capabilities and an antecedent ofexport venture performance.

The Role of Export Capabilities

For exporting manufacturers that compete on the basisof service, customer relationship capability and product

development capability have a direct positive effect onservice advantage. The finding is in accordance with the

RBV, relationship marketing, services marketing, andnew product development literature streams, whichlargely support a positive relationship between thesecapabilities and performance outcomes (Agarwal,Erramilli, and Dev 2003; Song and Parry 1997; Srini-vasan and Moorman 2005; Vorhies and Morgan 2005).

The next set of confirmed relationships is also in accor-dance with current research expectations. The capabilityto acquire valuable export marketrelated information

facilitates the development and nurturing of good rela-tionships with overseas customers. Such information islikely to spread cross-functionally and update the prod-uct development processes, thus contributing to thedevelopment or refinement of exported products forease of delivery and after-sales service in the overseasmarkets. Often, the distributors actively pursue productalterations that would enable them to meet their coun-

trys regulations and better serve end users overseas.

Exporting manufacturers customer relationship capa-bility also had a direct positive effect on service advan-tage. Positive cross-border customer relationships havebeen found to exert a positive impact on export per-formance of services (Sichtmann and Von Selasinsky2010), whereas a relationship of interpersonal skills andperceived performance has not been confirmed in a busi-ness-to-business services context (La, Patterson, and

Styles 2009). In light of such evidence, it could beassumed that though this capability per se may not be

enough to make an impact in a pure services environ-ment, it seems to work well for manufactured productsas a complement to the overall offering.

The set of processes that reflect the exporters ability todevelop new and modify existing products is essential

for manufacturing firms aiming to achieve a serviceadvantage. In this context, because service is a comple-ment rather than the main element of the offering, it is

Table 3. Structural Model Results

Direct Path in Theoretical Model Hypothesis Standardized Coefficient t-Value

Experiential resources customer relationship capability H9 (supported) .350 4.56

Experiential resources informational capability H8 (supported) .530 6.83Financial resources product development capability H7 (supported) .211 3.13

Financial resources informational capability H6 (supported) .125 2.02

Customer relationship capability service advantage H5 (supported) .257 3.48

Informational capability customer relationship capability H4 (supported) .510 5.95

Informational capability product development capability H3 (supported) .322 4.34

Product development capability service advantage H2 (supported) .227 3.13

Service advantage export venture performance H1 (supported) .210 3.18

Fit Indexes

2(285) = 613.40,p < .001; normed fit index = .92; nonnormed fit index = .95; comparative fit index = .95; and root mean

square error of approximation = .06

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important that the products functional and aestheticfeatures facilitate the various aspects of service delivery,albeit with minimal compromise in product quality and,increasingly, cost. Therefore, the relevant product devel-opment processes emerge as important influencers,enabling fast and reliable delivery and trouble-free tech-

nical support and after-sales service (Lele and Kar-markar 1980).

The Role of Export Resources

The previously mentioned capabilities are largely nur-tured by two fundamental resources: financial and expe-riential. Financial resources are vital for supporting thecostly product development capability, and crystallized

export-related experiential resources enrich both infor-mational capability and, more important, the firmsability to relate to overseas customers. Regardingexport-related experiential knowledge, the findings sup-

port the argument for its positive role in influencing theprocesses of market-related monitoring and informationacquisition. Although knowledge based on substantialexport experience could breed overconfidence in the

extant ways and impede the adoption of innovativemethods, it is not the case in exporting. Experientialknowledge stemming from involvement in a variety ofproducts and overseas markets broadens organizationalmemory as a depository of approaches to developingmarket intelligence (Hult, Ketchen, and Slater 2004;Kaleka and Berthon 2006). With increasing globaliza-tion, new markets are more likely to bear some resem-

blance to certain cultural or procedural traits of theestablished venture markets, allowing for more effectiveimprovisations in the informational processes adoptedin the new ventures.

Availability of financial resources positively influencesinformational capability. It could be argued that theexpansion in the use of Internet services, rendering sta-tistical data, market, and country-related information(e.g., governmental reports, articles in the press, com-

petitor Web sites) easily accessible, has diminished theimportance of available finance for market information

acquisition. Exporters can obtain a fairly accurate pic-ture of their target markets, and the use of e-mail and aplethora of Internet resources allow for frequentexchange of information with multiple sources at mini-mal cost. Nonetheless, the need for activities such asacquisition of specialized data, participation in trade

fairs, and managerial visits to potential overseas mar-kets, which have been signaled as common, albeit costly,means of acquiring valuable export market information

(Seringhaus and Rosson 1998), may provide an expla-nation for this finding.

The adopted framework provides an initial explanationof how key idiosyncratic firm factors combine to enablethe exporting firm to achieve service advantage. While a

greater level of specificity in designating the examinedresources and capabilities to allow for more detailedinsights into the processes enabling superior servicedelivery might be preferred, such an endeavor should beconsidered a subsequent step. The role of this studysconceptualization is primarily integrative, setting a plat-form that could serve as the basis for future researchefforts.

LIMITATIONS AND AREAS FOR FURTHER

RESEARCH

This studys findings should be viewed in the light of

several limitations that provide opportunities for furtherresearch. The cross-sectional nature of the study doesnot allow for proper causal statements or testing ofrecursive relationships. A longitudinal study based on

the model developed here would provide stronger evi-dence of the direction of causality, which is only impliedin the hypotheses. The use of a single, albeit knowledge-able, informant for questions related to all study con-structs could be substituted in a future study for moredirectly relevant sources of information. For example,the end users could be asked directly to provide theirperceptions of the exporting manufacturers offering in

the various overseas markets to measure service advan-tage, or researchers could use different sources of data,such as internal company reports and, to some extent,financial statements, to measure export venture per-formance and the exporting firms resources and capa-bilities, respectively.

Focusing on the perceptual measures used here, all con-struct items could be revisited to generate even morerobust measures of the idiosyncratic firm factors. With

regard to the operationalization of the central con-structnamely, service advantage in the export venture

marketthis study has raised some interesting issuesand has adopted a mixed measuremainly formativewith a reflective component. A research suggestion is todevelop a more detailed formative measure of this con-struct, potentially encompassing additional export ser-vice advantage dimensions. Furthermore, this study

examined only the economic performance outcomes ofservice advantage. Future studies could use richer meas-ures capturing strategic outcomes (e.g., the EXPERF

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scale; Zou, Taylor, and Osland 1997), customer out-comes such as loyalty, and relationship performance(e.g., Lages, Silva, and Styles 2009).

As for the conceptualization, although the assortment ofexporting manufacturers resources and capabilities

included in the conceptual model is fairly comprehensive,the role of factors such as brand image and market ori-entation is worth investigating. Alternatively, researcherscould study the distributor resources and capabilitiesthat complement those of the manufacturer (e.g., dis-tributor reputation, distributor marketing, operationalcapabilities), preferably analyzing exporterdistributordyads. Finally, a variety of market-related, cultural andinstitutional distance factors could moderate the effect of

marketing capabilities on service advantage and that ofservice advantage on export venture performance.

MANAGERIAL IMPLICATIONS

Business practitioners who are already involved inexporting can benefit from this studys findings. As they

obtain a more detailed picture of the role of key resourcesand capabilities in determining service advantage in theoverseas markets, they can be assisted in deciding on theirresource allocation and investment plans. More specifi-cally, firms that want to direct their efforts to competingon the basis of superior customer service are advised toinvest in building enduring customer relationships andup-to-date product development processes. They should

also place emphasis on establishing market informationacquisition mechanisms that will strengthen the firmsrelational capability and provide constructive input toproduct development processes, enabling the develop-ment of products easy to deliver and support.

There are also implications for firms that are consider-ing some sort of export involvement. Managers of smallto medium-sized enterprises often put off internationalexpansion, assuming that the availability of substantial

financial resources is a necessity for establishing success-ful export activities. The suggestion here is to develop

market knowledge by exploiting available, less finan-cially demanding avenues. Governmental agencies, tradeorganizations, and, increasingly, Internet sources canprovide valuable information on potentially attractiveoverseas markets at little or minimal cost. Because expe-rienced exporters seem to be better equipped to deploy

market sensing capabilities, it is suggested that relativelynew exporting manufacturers embracing a long-termview of international involvement should be willing to

take risks and experiment with initial export ventures todevelop valuable export-related experiential knowledge.Along this line, government-funded bodies aimed atpromoting exports could provide platforms that facili-tate the flow of information and the establishment ofcontacts between interested parties rather than direct

financial assistance.

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THE AUTHOR

Anna Kaleka (PhD, Cardiff University) is a Reader in

Marketing and Strategy at Cardiff Business School,Cardiff University. She teaches marketing and strategytheory, strategic management, and international market-ing with postgraduate students. Her research interestsare mainly in the areas of strategic capabilities, inter-national marketing, and the marketing organization.

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