International Business Review 24 (2015) 772–780
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International Business Review
journal homepage: www.elsevier.com/locate/ibusrev
Effect of export experience and market scope strategy on export
performance: Evidence from Poland
Jerzy Cieślik a,*, Eugene Kaciak a,b,1, Narongsak (Tek) Thongpapanl b,c,2
a
Center for Entrepreneurship, Kozminski University, Jagiellonska 59, Warsaw, Poland
Goodman School of Business, Brock University, St. Catharines, ON, Canada L2S 3A1
c
Chiang Mai University, Chiang Mai 50200, Thailand
b
A R T I C L E I N F O
A B S T R A C T
Article history:
Received 10 April 2014
Received in revised form 5 February 2015
Accepted 13 February 2015
Available online 29 March 2015
This study examines the impact of internationalization experience and market scope strategy on the
export performance of firms operating in Poland. This study uses data from 2003 to 2010, an eight-year
period that includes the country’s accession into the European Union in 2004. Several important findings
are revealed by the research. First, a firm’s export experience and performance have an inverted Sshaped relationship, i.e., performance is increasing at low and high levels but decreasing at moderate
levels of experience. Second, the relationship between the growth of the number of export countries and
export performance is initially positive, but becomes negative over time. Third, over time the growth of a
firm’s share of the main export market is found to be negatively related to export performance. Revealing
the dynamism of these relationships through a longitudinal approach is of theoretical and practical
importance to scholars, practitioners and governments of other emerging economies that are
considering joining similar trade organizations/agreements.
ß 2015 Elsevier Ltd. All rights reserved.
Keywords:
Emerging economy
Export experience
Export marketing strategy
Export performance
Inverted S-shaped relationship
1. Introduction
As international competition increases, it is important for firms
to develop and implement successful strategies in order to ensure
satisfactory export performance outcomes (Casey & Hamilton,
2014; Laufs & Schwens, 2014). How and why some firms succeed in
certain foreign markets, while others fail, is one of the critical
issues in international strategic management (Beleska-Spasova,
Glaister, & Stride, 2012). Certainly degree, scope and speed, the
three most important strategic dimensions of international
entrepreneurship as defined by Zahra and George (2002), play a
role in the success or failure of a firm (Khavul, Pérez-Nordtvedt, &
Wood, 2010).
In this study, we argue that a firm’s success in a foreign market
depends not only on its given portfolio of resources and
capabilities, as per the resource-based view (RBV), but also on
its capacity and ability to constantly change and adjust to
international uncertainties. Therefore, we complement RBV with
the dynamic capability view (DCV) (Kogut & Singh, 1988; Villar,
* Corresponding author: Tel.: +48 502 030 030.
E-mail addresses: cieslik@kozminski.edu.pl (J. Cieślik), ekaciak@brocku.ca
(E. Kaciak), TEK@brocku.ca (N.(. Thongpapanl).
1
Tel.: +1 905 688 5550x3902.
2
Tel.: +1 905 688 5550x5195.
http://dx.doi.org/10.1016/j.ibusrev.2015.02.003
0969-5931/ß 2015 Elsevier Ltd. All rights reserved.
Alegre, & Pla-Barber, 2014). This approach offers a suitable
theoretical foundation for our research as it assumes that it is
possible for a firm to not merely respond to external challenges but
also to learn, integrate, build and actively reconfigure its internal
and external competencies (Prange & Verdier, 2011). Not only does
this approach take into consideration the relationships between
the external environment and the firm, but other factors that may
also have an impact on a firm’s strategy formulation and
performance in a global setting, such as an entrepreneurial vision,
managers’ international experience and alertness to opportunities,
can also be considered (Crick, 2009).
We use export experience and market scope strategies to
measure a firm’s engagement with the internationalization process
and propose that export experience and performance have an
inverted S-shaped relationship. Using Poland as an example, we
also seek to describe the internationalization process of firms
operating in an emerging economy. What makes this study distinct
from similar studies of firms operating in emerging economies is
that it takes into account the context of the sudden, albeit
anticipated, opportunities that were made available to Polish firms
through easier access to the vast European Union (EU) market. Our
study also offers important insights into the role of internationalization expansions during transition periods. We examine data
from 2003 to 2010, covering the year leading up to and the six-year
period following Poland’s 2004 accession to the EU. We assume
that Polish firms had already taken the scheduled 2004 accession
J. Cieślik et al. / International Business Review 24 (2015) 772–780
into account in their strategic orientations in 2003 (or even earlier)
and that their behavior during the year 2003 is very similar to the
subsequent years. The now available EU funds created a favorable
environment for the general economic development of Polish firms
and, thanks to the unrestricted access to the EU countries, for the
improvement of export conditions. Consequently, the export
diversification opportunities for Polish firms increased dramatically during this timeframe. No doubt, most of these firms were
exporters before the EU accession; however, without the benefits
of the EU membership, their export activities during the years
2003 to 2010 would most likely have followed the pathways
proposed by the traditional theory of internationalization and have
continued to develop rather slowly and gradually (Johanson &
Vahlne, 1977).
Although time is an important dimension of the entrepreneurship process, the extant international business research is
characterized by static, cross-sectional studies (Coviello & Jones,
2004). The snapshot nature of cross-sectional studies limits their
ability to examine how internationalization processes unfold (De
Clercq, Sapienza, Yavuz, & Zhou, 2012). Kuivalainen, Saarenketo,
and Puumalainen (2012) pointed to a need for longitudinal studies
with large samples to further examine the pattern and speed of
internationalization. Similar calls have come from other scholars
with the objective of resolving the contradictory results found by
various researchers in the field over the past several decades
(Casillas, Moreno, & Acedo, 2012). Observing a firm before and after
its first international sale may help explain the nature of the
changes that a firm faces during the internationalization process
and the performance consequences of these changes (Kuivalainen
et al., 2012). In this study, we adopt a dynamic and time-related
approach and base our analysis, which is grounded in the dynamic
capability-based view, on longitudinal data.
To examine the impact of internationalization experience and
market scope strategy on a Polish firm’s export performance, we
have organized the study as follows. First, we present a literature
review on the relationships between export performance, experience and market scope strategies, which results in a set of research
hypotheses. A methodology section describes the data collection
process, the measures utilized and the longitudinal analysis used
on the 2003–2010 data. Then, we present and discuss the results in
reference to the country’s 2004 accession to the EU. Finally, we
draw conclusions, discuss the limitations of the study and reveal
the theoretical and practical importance of our findings to scholars,
practitioners and governments of other emerging economies that
are considering joining similar trade organizations/agreements.
2. Theoretical framework and hypotheses
There is a considerable amount of empirical evidence available
on the impact of alternative market scope strategies on the export
performance of a firm. However, the results are either contradictory or inconclusive (Beleska-Spasova et al., 2012; Ruzo, Losada,
Navarro, & Diez, 2011). For example, a fundamental postulation
that describes the traditional pattern of a firm’s internationalization, known as the Uppsala model, is that internationalization is a
process in which a firm gradually increases the number and
diversity of the markets it serves (Kuivalainen et al., 2012). Thus,
the theory postulates that a firm following the traditional
internationalization pattern should have a narrow market scope
at the beginning of its international operations and, therefore, the
market concentration strategy should be the preferred option.
However, research has shown that some firms undertake a
contradictory approach to internationalization. In contrast to the
pattern of the Uppsala model, born global (BG) companies begin to
operate in multiple countries almost from inception (e.g., Loane,
Bell, & Cunningham, 2014; Oviatt & McDougall, 1994), and their
773
favorable export strategy should be market spreading. It is also
important to note that most studies that have examined the
relationships between export performance and export experience
and/or market scope strategies were primarily conducted in the
context of developed economies (Chao & Kumar, 2010; Chen & Hsu,
2010; Contractor, Kundu, & Hsu, 2003; Lee, 2010; Li, Qian, & Qian,
2012; Lin, Liu, & Cheng, 2011; Lisboa, Skarmeas, & Lages, 2013;
Mas, Nicolau, & Ruiz, 2006). In contrast, studies on emerging
market firms have been rarely undertaken (Contractor, Kumar, &
Kundu, 2007; Sahaym & Nam, 2013; Xiao, Jeong, Moon, Chung, &
Chung, 2013).
Internationalization scholars (Katsikeas and Leonidu, 1996; Lee
& Yang, 1990) highlight that exporting firms have the tendency to
either concentrate their export scopes to a smaller number of
foreign markets located closer to their home markets, to spread
their export landscapes to include a large numbers of markets, or to
do both concurrently. Morgan-Thomas and Jones (2009) find that
many firms opt to go with the concurrent entry into a larger
number of export markets at the very outset of their expansion.
This extensive international expansion is chosen, as Rialp, Rialp, &
Knight (2004) argue, not only because firms are driven to
maximize sales and market shares, but because they are also
trying to safeguard themselves against competition and optimize
their resource utilization. Datta, Rajagopalan, & Rasheed (1991),
however, assert that having a presence and operating in multiple
countries with varying cultural contexts may also burden firms
with a significant increase in transaction and operating costs,
which could potentially not be offset by the benefits of
international expansion.
The prevailing view in the literature suggests that increasing
the market scope should, at least initially, enhance a firm’s export
performance since it enables the optimization of the cost/benefit
ratio of internationalization (Chao & Kumar, 2010; Lee, 2010; Li
et al., 2012). When geographic spread is moderate, RBV indicates
that such moderate sharing of assets leads to economies of scale (Li
et al., 2012). Furthermore, firms operating in multiple countries
may be less vulnerable to individual fluctuations in market
demand and therefore may be better able to survive any market
shocks. Firms with more international experience are also likely to
have better knowledge of foreign conditions than firms with less
international experience and, as a result, are much better at
positioning their firms strategically in response to the various
international conditions and in preparation for further international expansion opportunities (Barkema & Shvyrkov, 2007).
When Poland joined the EU, the first phase in the rapid and
frequently chaotic increase of the Polish firms’ export potential
was similarly characterized by a market spreading approach.
Thanks to the newly accessible export markets, the firms began to
enjoy higher export sales due to the sheer volume of transactions
scattered throughout multiple countries. This stage is equivalent to
Stage 2, the ‘‘mid-stage internationalizers,’’ in the three-stage
S-shaped model of international expansion proposed by Contractor
et al. (2003). Polish companies did not have to go through Stage 1 of
the aforementioned model, the stage associated with ‘‘early
internationalizers.’’ As a member of the EU, they also did not face
the liability of foreignness, as early internationalizers would
normally face, and did not have to endure the additional burden
or costs associated with this liability. Given that Polish firms have
already been engaging in export activities prior to joining the EU, it
is reasonable to assume that they have, to some extent, already
acquired the needed export resources and capabilities. Nonetheless, these resources and capabilities may have been underutilized
due to the limited opportunities for internationalization available
to Polish firms. In this early, post-EU entry phase, Polish firms were
likely to realize their market spreading strategy through familiar
and neighboring markets, as the firms used and stretched their
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J. Cieślik et al. / International Business Review 24 (2015) 772–780
resources and capabilities to take advantage of the easily accessible
opportunities for growth (Chao & Kumar, 2010; McDougall, Shane,
& Oviatt, 1994).
However, a firm’s rapid increase of export potential might result
in a shallow penetration into each market and the possibility of a
subsequent decline in export performance since their limited
marketing budget would have to serve a larger number of markets
(Ruzo et al., 2011). When firms use up their slack resources and
exhaust their capabilities during this post-entry phase, they cannot
continue on their positive international growth and expansion
paths until they replenish these resources and renew these
capabilities. This stage matches Stage 3 in Contractor’s et al. (2003)
model that depicts ‘‘highly internationalized firms.’’ This initial
growth followed by a subsequent decline is also conceptually
similar to the exploitative process of internationalization, which,
based on the application of existing knowledge by a firm, closely
follows the traditional incremental approach to internationalization (Kahiya & Dean, 2014; Lisboa et al., 2013; March, 1991; Prange
& Verdier, 2011; Villar et al., 2014). When the exploitative
internationalizing firm develops its knowledge based on past
experiences rather than on new capabilities, it unwittingly
restricts its ability to explore new feasible paths for export growth.
Following the volatile phase of temporary growth and the
subsequent decline of export performance, surviving firms will use
their newly acquired experience to start moving to the next phase
of market expansion. During this later post-entry phase, firms
recognize the limit of their home-country-derived capabilities as
they explore and develop host-country specific knowledge (March,
1991). As a result, firms enter a period where they accumulate new
resources, acquire fresh knowledge, learn different routines and
business practices, as well as build and annex different capabilities,
in order to get back on the path of positive growth and expansion
after the period of contraction. This is analogous to the explorative
phase of internationalization (Kahiya & Dean, 2014; Lisboa et al.,
2013; March, 1991; Prange & Verdier, 2011; Villar et al., 2014),
when a firm is able to expand thanks to the new resources and
capabilities that are strategically acquired for their chosen export
market opportunities. During this market exploration stage, the
firm’s export performance will stop deteriorating and may slowly
start improving again.
Thus, the internationalization process of firms exporting from
Poland encompasses three phases:
(1) a phase of a rapid, frequently chaotic and euphoric increase in
exporting activities in many countries;
(2) a phase of a subsequent decline in export performance; and
(3) a phase of a gradual optimization of market spreading efforts
by new learning and experience, thus leading to an improved
and more stable market performance.
These three phases of internationalization can also be found in
Lee (2010), although in that study the phases are found within the
framework of the relationship between firm performance and the
degree of internationalization (foreign sales to total sales ratio;
FSTS), rather than export experience or market spreading strategy.
Lee (2010) shows that the performance of internationalized new
ventures will first be higher, when the level of their internationalization starts increasing (Phase 1), and then lower, when the firm
starts experiencing increased transaction costs (Phase 2). In Phase
3, the firm will start accumulating business experience in its
expanded foreign markets and will again start improving its
performance. Additionally, Lee (2010) showed the existence of a
fourth phase, in which the increased costs from the liability of
foreignness outweigh the additional benefits from further international expansion. In essence, Lee’s (2010) model of the
relationship between internationalization and performance is an
M-shaped curve. Our proposed three-phase model corresponds to
the first three sections of the M-shaped curve and therefore our
model forms an inverted S-shape. The inverted S-shaped
relationship between firm performance and the degree of
internationalization was also found (albeit only for capitalintensive sectors) by Contractor et al. (2003). Chao and Kumar
(2010) as well as Li et al. (2012) performed similar tests for the
existence of the inverted S-shaped curve; however, they were
unable to obtain a significant cubic term of the geographic spread
variable. The S-shaped (not inverted) relationship between a firm’s
internationalization and its performance was confirmed by
Contractor et al. (2003) for knowledge-based sectors, by Lu and
Beamish (2004) and Xiao et al. (2013). The S-shaped relationship
has also been tested by Chen and Hsu (2010) and Lin et al. (2011),
both of whom found insignificant results. In fact, Chen and Hsu
(2010) obtained an unexpected opposite result, the inverted Ushape, which they suggested could represent the second and third
stages of Contractor’s et al. (2003) model. However, we also note
that the inverted U-shape encompasses the first two sub-stages of
the inverted S-shape, which supports the three-stage model
hypothesized in this paper. An inverted U-shaped relationship
between internationalization and performance was also confirmed
by Hitt, Hoskisson, and Kim (1997), Chao and Kumar (2010), Li et al.
(2012), and Chen, Jiang, Wang, and Hsu (2014). Table 1 presents a
summary of studies that have considered the relationships
between export performance, export experience and/or market
scope strategies.
In accordance with these arguments, we propose that:
H1. Export experience and performance have an inverted Sshaped relationship: performance is increasing at both low and
high levels of experience but it decreases at moderate levels of
experience.
H2. The growth of the number of export countries and export
performance have an inverted S-shaped relationship: performance
is increasing at both low and high levels of market spreading but it
decreases at moderate levels of market spreading.
Results reported in the literature on market concentration
activities are at best inconclusive or insignificant in this regard
(Mas et al., 2006). While there is ample research investigating
which of the two strategies, market spreading or market
concentration, actually leads to better export performance, the
results are mixed. Certainly superiority of the market spreading
strategy over the market concentration strategy has been found in
many studies (Beleska-Spasova et al., 2012; Casey & Hamilton,
2014; Cieślik, Kaciak, & Welsh, 2012; Kahiya & Dean, 2014; Khavul
et al., 2010). However, there is also a substantial body of research
which claims that it is unclear which of the two strategies leads to
the best results (Mas et al., 2006; Ruzo et al., 2011). In view of this
lack of evidence regarding the possible increased performance
benefits from the market concentration approach, we propose that:
H3. No relation exists between the growth of the share of the main
export market and export performance during any phase of the
firm’s internationalization process.
3. Methods
3.1. Sample
Our research was based on panel data (2003–2010) that can be
found in the database of Polish commodity exporters maintained
by the Analytical Centre of Customs Administration (CAAC), a
Polish Government Institution. The dataset used in the analyses
described henceforth is the result of the compilation of the
J. Cieślik et al. / International Business Review 24 (2015) 772–780
775
Table 1
Relationships between export performance, experience and/or market scope strategies.
Study
Empirical setting
Export
performance
(dependent
variable)
Export experience and/or market scope
strategies (independent variables)
Shape of the relationship
This current study
321 Polish firms;
longitudinal study
(2003–2010)
Export sales growth
Time after internationalization (tai);
the number of export markets growth;
the major exporter’s share growth
Chao and Kumar (2010)
Fortune Magazine
Global 500 firms;
cross-sectional study
(2004)
224 Taiwanese firms;
longitudinal study
(2000–2005)
685 Chinese firms;
longitudinal study
(2008–2011)
103 world’s largest
service firms
Return on assets
(ROA)
A composite index based on the
number of foreign subsidiaries and the
number of countries in which they
operate
The total number of foreign countries in
which the firm had subsidiaries in a
given year
The foreign sales to total sales ratio
(FSTS)
The inverted S-shape (for tai) The
inverted U-shape (for the number of
export markets growth; the inverted Sshape hypothesized as well but not
confirmed) No relationship for the
major exporter’s share growth
The inverted U-shape (the inverted Sshape hypothesized as well but not
confirmed)
Chen and Hsu (2010)
Chen et al. (2014)
Contractor et al. (2003)
Hitt et al. (1997)
Lee (2010)
Li et al. (2012)
295 US firms crosssectional study
(1989)
2236 Korean firms
cross-sectional study
(2002)
278 US firms;
longitudinal study
(2003–2009)
Earnings before
interest and taxes
(EBIT)
ROA
Return on sales
(ROS); ROA
ROA
Return on equity
(ROE); ROA
ROA; ROS
Lin et al. (2011)
179 Taiwanese firms;
longitudinal study
(2000–2005)
ROA
Lu and Beamish (2004)
1489 Japanese firms;
longitudinal study
(1986–1997)
Xiao et al. (2013)
114,398 Chinese
firms; longitudinal
study (2001–2007)
ROA; the market
value of assets
divided by the
replacement value
of assets (Tobin’s Q)
ROA; ROS
customs data on commodity exports (provided by the Customs
Office) with economic and financial data (filed in the National
Corporate Registry). Unfortunately, Polish companies sometimes
delay their financial submissions, and, therefore, only a limited
number of more recent financial statements were available. The
last year with complete coverage was 2010.
The 321 companies identified and selected for this study’s
research purposes were domestic firms based in the centrally
located Mazovia region that engaged in export sales every year
during the 2003–2010 period and had manufacturing as their core
activity (NACE 2 10–33). It is worth noting that the Eurostat data on
GDP in European regions shows that in 2009 Mazovia reached a
GDP level of EUR 22,800. This GDP level was 91% of the EU average
and a level 15 percentage points higher than the region’s pre-2004
GDP. We followed a recommendation from Freixanet (2012) and
confined our analysis to a single region, rather than to the entire
country, because of possible variations in the internationalization
processes that may be present among the other, less advanced,
regions of Poland. A similar approach was taken by Xiao et al.
(2013) when they neutralized the location effect on international
strategy and firm performance by limiting their sample to one of
the most rapidly developing areas in China: the Yangtze River Delta
A composite index based on the FSTS,
the foreign employees to total
employees ratio, and the number of
foreign offices to the number of total
offices ratio
A composite index based on the foreign
sales attributed to the market and the
weight given to each market
FSTS
The number of foreign markets served
by the firm; A composite index based
on the foreign sales attributed to the
market and the weight given to each
market
A composite index based on the FSTS,
the foreign assets to total assets ratio,
and the number of countries in which
the firm has subsidiaries
The number of the firm’s foreign
subsidiaries in each year; the number of
countries in which the firm had foreign
subsidiaries in a given year
The export sales to total sales ratio
(ESTS)
The inverted U-shape (the S-shape
hypothesized as well but not
confirmed)
The inverted U-shape
The inverted S-shape (for capitalintensive sectors) The S-shape (for
knowledge-based sectors)
The inverted U-shape (for moderate
diversifiers)
The M-shape
The inverted U-shape (the inverted Sshape hypothesized as well but not
confirmed)
The S-shape and U-shape tested but not
confirmed
The S-shape
The S-shape
region. We included only the firms that have export sales every
year during the 2003–2010 period to ensure that these firms were
committed to expanding their international operations and that
internationalization was not meant to be sporadic (Kuivalainen
et al., 2012). We excluded foreign subsidiaries from our study as
they are part of a bigger network and are likely to have or could
access considerable critical resources (e.g., foreign market
knowledge, financing) that would typically be unavailable to
and potentially irrelevant (e.g., global production rationalization)
for local Polish firms.
Of the 4850 companies in Mazovia contained in the database of
Polish commodity exporters maintained by the CAAC, only
321 companies (or approximately 6.6%) met the above criteria
and have all the economic and financial data needed for the
purposes of our study. The CAAC database contains only information about exports and imports, which we matched with other
sources such as the official company register (REGON) and
economic and financial data provided by professional suppliers.
We also attempted to obtain data on turnover, employment and
assets. It was possible to obtain the data for only 298 exporting firms
and only for the period of 2007–2010. We supplemented the base
dataset of regular exporters in 2003–2010 with this additional data.
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3.2. Variable definition
3.2.1. Dependent variable
In line with the objectives of the study, our dependent variable
is export performance, namely export sales growth (expgr),
calculated as relative ratios (in terms of percentages) of export
sales (exp) in two consecutive years, i.e., [exp(t) exp(t 1)]/
exp(t 1). Export sales growth has also been used in a number of
other studies (Cieślik, Kaciak, & Welsh, 2010; De Jong & van
Houten, 2014; Ruzo et al., 2011; Sleuwaegen & Onkelinx, 2014).
Due to its skewed distribution, we transformed that variable by
using its logarithm (log_expgr).
3.2.2. Independent variables
We operationalized the market spreading activities by basing it
on the number of countries to which a firm was exporting its
product(s) in a given year (country). We calculated the relative
ratios (countrygr; in terms of percentages) of country in two
consecutive years, i.e., [country(t) country(t 1)]/country(t 1).
Due to its skewed distribution, we transformed that variable by
using its logarithm (log_countrygr). The number of export countries
is a very popular indicator of the market spreading activities and
strategy (Gallego & Casillas, 2014; Hilmersson, 2014; Kuivalainen
et al., 2012; Mas et al., 2006).
We defined the market concentration activities in a similar way.
Each firm’s export sales as channeled to its largest export market
were provided in the original CAAC dataset as a percentage of the
firm’s total export sales in a given year (prcmjrexp). We calculated
relative ratios (prcmjrexpgr) in terms of percentages of prcmjrexp in
two consecutive years, i.e., [prcmjrexp(t) prcmjrexp(t 1)]/
prcmjrexp(t 1). Due to its skewed distribution, we transformed
that variable by using its logarithm (log_prcmjrexpgr). The share of
the key export market to total export sales is a frequently used
measure of market concentration activities and strategy (MorganThomas & Jones, 2009).
As we have already emphasized, the time after internationalization (tai) is an important component in international entrepreneurship/business research because it determines, among
other things, a firm’s export experience (Mas et al., 2006; Wu &
Chen, 2014). We operationalized this variable as the difference
between the firm’s age and the time it took to embark on
internationalization (tti), which is a well-established variable in
internationalization research.
3.2.3. Control variables
We controlled for firm size (operationalized as the logarithm of
employment; De Jong & van Houten, 2014; log_empl), time to
internationalization (Gallego & Casillas, 2014; Suh & Kim, 2014;
log_tti), as well as for manufacturing industry technology levels
(Casey & Hamilton, 2014; OECD, 2005). We combined high and
medium-high technology levels into one category as we had
identified a rather small number of firms in each of these two
categories (mfct_ht_mht) followed by medium-low (mfct_mlt) and
low-technology dummies (mfct_lt; the reference category).
3.3. Model selection
To find empirical support for our hypotheses, we tested the
relationships between export performance, export experience and
the market scope strategies. We used the panel data technique
because the data-set in this study has both a time series and a
cross-sectional dimension. As a firm’s behavior may have dynamic
characteristics which cannot be explained by static panel models,
we used dynamic models in which lagged dependent and
independent variables are used as explanatory variables (Franco,
2013; Li et al., 2012).
First, we determined the order of lags for the dependent
variable. Specifically, we compared the mean square error of the
model with the first-order lagged dependent variable with that of
the second- and third-order lagged models. The results indicated
that there was no difference between them. Thus, we assumed that
the use of only the first-order lagged dependent variable is
appropriate as its coefficient fully reflects all past information
synthetically (Qian, Li, Li, & Qian, 2008). Second, to account for a
possible relationship between the strategy chosen and future
export performance, we lagged the market strategy variables by
four years. Finally, as the reverse relationship that runs from
exports to the market scope strategy-related variables may still
exist despite the use of a lag structure in these variables, we dealt
with this endogeneity by using the generalized method of
moments (GMM). The GMM estimator takes into account
problems that arise when estimating the model with endogenous
variables (Yi, Wang, & Kafouros, 2013). Thus, the following model
was applied for estimation:
log expgr it ¼ a þ b1 log expgr i;t1 þ b2 log em plit þ b3 log ttiit
þ b4 tlt þ b5 taiit þ b6 tai2it þ b7 tai3it
þ b8 log prcm jrexpgr i;t p þ b9 log countrygr i;t p þ hi
þ eit ;
p
¼ 0; 1; 2; 3; 4
where expgrit represents export performance for firm i (i = 1,
2,. . .,321) at time t (t = 1, 2,. . .,8); the next three variables control
for firm size (emplit), time to internationalization (ttiit), and
technology level (dummies tlt); taiit represents time after
internationalization; prcmjrexpgri,t-p captures a relative increase
from year (t 1) to year (t) in the percentage of the ith firm export
sales channeled to its largest export market in a given year, lagged
p years; similarly, countrygri,t-p depicts a relative increase from year
(t 1) to year (t) in the number of countries to which a firm i was
exporting its product(s) in a given year, lagged p years; hi are the
panel-level effects (which may be correlated with the covariates)
and eit are the unobserved error terms of the ith cross-sectional
unit. Since there were no significant events in Poland during the
period of study beyond joining the EU, we did not include any year
dummies in our model.
The endogeneity caused by the lagged market strategy variables
and the lagged export performance is addressed using system
GMM (sys-GMM). Arellano and Bond (1991) and Blundell and Bond
(1998) have suggested that an application of the sys-GMM
estimators is a more appropriate and efficient approach to dealing
with dynamic panel data than using the diff-GMM estimators.
Furthermore, the sys-GMM is designed for datasets with many
panels and few periods, as in our case. We found robust standard
errors to correct for possible heteroscedasticity.
4. Results
Table 2 presents descriptive statistics for, and very low pairwise correlations among, the variables used in this study. An
additional regression diagnosis conducted using the varianceinflating factor (VIF) to determine the existence of multicollinearity among the variables further confirmed that multicollinearity is
not a major concern in this study: all VIFs were below 1.5
(Cenfetelli & Bassellier, 2009).
The sys-GMM estimation results are reported in Table 3. We
tested our hypotheses using four regression models. Model 1 is the
base model that includes the effects of all of the control variables
on export performance. Models 2–4 test the hypothesized inverted
J. Cieślik et al. / International Business Review 24 (2015) 772–780
777
Table 2
Descriptive statistics and correlationsa for the variables.
Variables
N
Mean
S.D.
Min.
Max
1
2
3
4
5
1.
2.
3.
4.
5.
6.
2247
881
1848
2247
2247
2568
0.0253
4.7445
0.8545
0.0118
0.0142
9.8146
0.5805
1.2210
0.8607
0.3018
0.4423
3.8339
5.7267
0.6934
0
1.4271
3.0445
0
3.9354
9.1901
2.9957
2.0176
1.7918
17
0.1265b
0.0075
0.1359b
0.3964b
0.1083b
0.0531
0.0603
0.0766b
0.1167b
0.0199
0.0131
0.0948b
0.3514b
0.0404
0.0758b
log_expgr
log_empl
log_tti
log_prcmjrexpgr
log_countrygr
tai
Where: expgr (export sales growth, i.e., export performance) = [exp(t) exp(t 1)]/exp(t 1), empl (employment, i.e., firm size), tti (time to internationalization), prcmjrexpgr
(major exporter’s share growth) = [prcmjrexp(t) prcmjrexp(t 1)]/prcmjrexp(t 1), countrygr (number of export markets growth) = [country(t) country(t 1)]/
country(t 1), tai (time after internationalization, i.e., export experience) = firm’s age tti.
a
For metric variables only.
b
Indicates significance at 5% level.
S-shape relationship between export experience (tai) and export
performance (H1). Additionally, Model 3 complements this
connection with the market spreading activities, represented in
this study by the growth of the number of export countries (H2)
while Model 4 does so with the market concentration activities,
represented by the growth of the share of main export market (H3).
The GMM estimator uses instrumental variables to estimate
parameters, which had to be tested for validity. As shown in
Table 3, the p-values of the Sargan test of over-identifying
restrictions for Models 3 and 4 are larger than the 0.05 level,
which suggests that the null hypothesis cannot be rejected and
that the instrumental variables chosen in the models are valid (Li
et al., 2012). The p-values of the first or second-order serial
correlation test for the four models are also larger than the
0.05 level, thus indicating that the error term is not first or secondorder serially correlated. Wald Chi-square p-values are below 0.05
(and below 0.10 for Model 2), which indicates that these models
are statistically significant. The results from Model 1 show that
none of the control variables have a significant regression
coefficient, and thus they exert minimal influence.
Our first hypothesis (H1) proposes that export experience and
export performance have an inverted S-shaped relationship, with
performance increasing at low and high levels of experience but
decreasing at moderate levels of experience. We test this in Models
2, 3 and 4, where time after internationalization (tai) is introduced
in its linear, quadratic and cubed forms. The final results suggest
that H1 is supported as the three regression coefficients are
significant and they have appropriate signs for an inverted S-shape
– a positive for the linear term, a negative for the squared term and
a positive for the cubed term.
To further examine how export experience influences export
performance, we left the effects of the other independent variables
unchanged and took a partial derivative of the dependent variable
based on the coefficients obtained using Model 4 in Table 3. This
Table 3
Regression of export performance on the individual variables of market scope strategy and international experience.
Independent variables
Model 1
Model 2
Model 3
Model 4
Constant
Export performance (t 1)
Firm size (log_empl)
Time to internationalization (log_tti)
Technological intensity dummies
Export experience (time after internationalization; tai)
tai squared
tai cubed
No. of export markets growth (log_countrygr) – (t)
L1 (t 1)
L2 (t 2)
L3 (t 3)
L4 (t 4)
Major exporter’s share growth (log_prcmjrexpgr) – (t)
L1 (t 1)
L2 (t 2)
L3 (t 3)
L4 (t 4)
Wald Chi-square
p-value
Sargan test of over-identifying restrictions
Chi-square
p-value
Arellano-Bond test for zero autocorrelation
in first-differenced errors (p-values)
Order 1
Order 2
No. of instruments
No. of groups
No. of observations
2.2512 (2.8347)
0.1792*** (0.0680)
0.2258 (0.4162)
0.9331 (1.0067)
Yes
0.2660 (3.5137)
0.1933*** (0.0708)
0.2875 (0.4891)
0.8007 (1.1668)
Yes
0.6795* (0.3788)
0.0609* (0.0348)
0.0016* (0.0009)
7.8066* (4.1246)
0.2397 (0.1595)
0.1330 (0.1986)
0.4872 (0.5277)
Yes
2.0297** (0.9319)
0.1698** (0.0765)
0.0045** (0.0020)
0.8291** (0.3912)
0.7094 (0.6629)
0.8608** (0.4268)
0.4870* (0.2681)
0.0408 (0.0946)
13.3125*** (5.1422)
0.2162* (0.1222)
0.6432 (0.5428)
0.5929 (1.5934)
Yes
2.1429** (0.8457)
0.1746** (0.0708)
0.0046** (0.0019)
Robust standard errors in parentheses (two-tailed tests).
*
Significant at 10%.
**
Significant at 5%.
***
Significant at 1%.
13.62
0.0182
13.59
0.0931
52.10
0.0000
1.3596 (0.9013)
1.0145 (1.0255)
0.8035 (0.8871)
0.5544 (0.7897)
0.3435* (0.1783)
32.86
0.0018
27.0191
0.0413
30.5829
0.0152
16.1952
0.1340
17.5251
0.0933
0.0056
0.1614
22
206
630
0.0063
0.1506
25
206
630
0.5067
–
25
201
483
0.3409
–
25
201
483
J. Cieślik et al. / International Business Review 24 (2015) 772–780
778
derivative turns out to be positive when the number of years after
internationalization is less than approximately 10 years or greater
than approximately 15 years. Thus, all other factors being equal,
the effect of export experience is positive during the first ten years
after the first export sale, then it becomes negative and remains
such until the firm had been operating for about 15 years on the
international markets, when it again returns to positive territory.
Fig. 1 represents this relationship graphically.
Hypothesis H2 proposes that the growth of the number of
export countries and export performance have an inverted Sshaped relationship: performance is increasing at both low and
high levels of market spreading but it decreases at moderate levels
of market spreading. The regression coefficients for the variable
log_countrygr in Model 3 are significantly positive during year t and
significantly negative for year (t 2) and year (t 3). Because we
did not find the inverted S-shaped relationship between the
growth of the number of export countries and export performance,
strictly speaking H2 is not supported. It is worth noting, however,
that our results indicate that market spreading activities and
performance have an inverted U-shaped relationship, which is the
front part of the inverted S-shaped relationship. This suggests that
H2 may be at least partially supported.
Hypothesis H3 predicts that export performance is not related
to the growth of the share of the main export market. Although for
the most part the regression coefficients for the variable
log_prcmjrexpgr in Model 4 are not significant, which suggests
that H3 appears to be at least partially supported, because the
negative coefficient for year (t 4) is statistically significant,
strictly speaking, H3 is not supported.
5. Discussion and conclusions
In this study, we have evaluated the impact of international
experience and market scope strategy on the export performance
of Polish firms during an eight-year period that includes the
country’s 2004 accession to the EU. Three important findings
emerge from our study that can offer theoretical and practical
insights to both international business scholars and practitioners.
First, similar to previous findings (Contractor et al., 2003 – for
capital intensive sectors; Lee, 2010 – based on the first three
phases of the M-shaped model), export experience and performance have an inverted S-shaped relationship, with performance
increasing at low and high levels of experience but decreasing at
moderate levels of experience. We determined that the first phase
of growth of export sales, sustained by the sheer volume of
transactions which are scattered throughout multiple countries,
may continue for about ten years. However, firms must be aware
that this growth is not typically sustainable and that during the
following period of approximately five years their export performance may decline. At the end of this second period, firms will
either have failed or survived. The outcome will be dependent on
their ability to use their new knowledge and experience to start
exploring and not merely exploiting the markets. In the case of
firms operating in Poland, our analysis shows that this next
successful phase of growth will take place about 15 years after the
firm has initiated its first export sale as a member (or soon to be
member) of the EU. Under the RBV and DCV frameworks, firms
would have used their slack resources and exhausted their
capabilities after the first phase of growth when the majority of
their deployment aims are focused toward easily obtainable export
market opportunities; however, firms cannot remain on their
positive international growth and expansion paths unless they
replenish their resources and renew their capabilities so that they
are able to address the needs of the lucrative but somewhat distant
opportunities.
Comparing the experiences of Polish firms after Poland joined
the EU with that of Spanish firms after Spain’s 1986 entry into the
EU (the two countries are of similar size and population), we note
that this event also accelerated the internationalization of Spanish
firms and produced a sizeable increase in commerce and two-way
Fig. 1. Inverted S-shaped relationship between export experience and performance (N = 321).
J. Cieślik et al. / International Business Review 24 (2015) 772–780
direct investment between Spain and the EU (Durán, 1999; Mas
et al., 2006). Spanish firms reached the highest degree of
multinationalization and the greatest foreign direct investments
(FDI) expansion about seven years after Spain’s accession (Durán,
1999; Mas et al., 2006). In this study, similar to Spanish firms, we
found that Polish firms reached the peak of their export
performance about ten years from their first export sale.
Second, we find that the market spreading activities are more
beneficial to exporting firms than the market concentration
activities as the concentration approach worsens the firms’ export
performance in the long run. However, the firms may not
immediately experience consistent export success with the market
spreading strategy. At the beginning, the euphoria caused by a
firm’s ability to be present in a large number of foreign markets at
once frequently comes at the expense of a shallow penetration in
each of the foreign markets, often the result of a limited marketing
budget shared among multiple markets. This may cause a
subsequent decline in the firm’s export sales. Only after having
survived this dangerous phase of market exploitation will the firm
start organizing its market spreading efforts more efficiently –
thanks to the new learning and experience that they have gained
during their initial expansion. During this initial market exploration stage, the firm’s export performance will slowly start
improving again, as they become better at adapting and aligning
their newly acquired resources and capabilities with their export
market landscapes (Lisboa et al., 2013; March, 1991; Prange &
Verdier, 2011). These adaptation and alignment activities are
afflicted with challenges. This is suggested by the fact that we
found no support for the final ‘‘positive’’ phase of the inverted
S-shaped relationship between the growth of the number of export
countries and export performance. One can interpret this nonfinding to mean that, on average, the Polish firms in our study were
not able to recover from these initial difficulties and thus had to
withdraw from some export markets and contract their international market expansion endeavors. Additional explanations for
this non-finding could be that it might take some time for Polish
firms in our study to adapt and align their newly acquired
resources and capabilities with their export market landscapes in a
timely fashion or that it might take some time for their
ambidextrous pursuits to result in higher export performance
outcomes (Lisboa et al., 2013; March, 1991; Prange & Verdier,
2011).
Third, while we have hypothesized that there would not be a
significant positive nor negative relationship between the firms’
growth of the share of the main export market and the firms’
export performance, it is worthwhile to note that our findings
suggest that there is a negative relationship between the two
variables during the later post-entry period. This suggestion of a
negative relationship should not be disregarded, given that
previous scholars (Allen & Pantzalis, 1996; Mas et al., 2006;
Pantzalis, 2001) have also cautioned about the negative impact of
internationalization efforts that concentrate on only a few export
markets. This negative finding may be evidence that the Polish
firms in our study were becoming too dependent on their main
export market, and thus, without an adequate level of diversification of the export base (Al-Marhubi, 2000; Grossman & Helpman,
1991; Herzer & Nowak-Lehmann, 2006), they may have over time
exposed themselves to a high risk and low return internationalization condition (Sleuwaegen & Onkelinx, 2014). Arguably, eventually the Polish firms in our study might find themselves reaching
the point of saturation with their main export market, where the
firms’ resources and capabilities will no longer allow them to
exploit and extract much from their main export market due
to conditions such as intensified competition, market maturation,
limited opportunities and demand shrinkages (Dean, Mengüç, &
Myers, 2000).
779
This study’s insights should be relevant and useful to
international business and marketing managers of a country that
is about to enter into a new free-trade zone or a new trade
agreement where there will be new export opportunities to
exploit in the short-term and explore in the long-term. The
increased awareness and understanding of the three key periods
that their firms would likely pass through [i.e., (1) a phase of a
rapid and frequently chaotic and euphoric increase of exporting
activities, (2) a phase of a subsequent decline in export
performance, and (3) a phase of a gradual optimization of market
spreading efforts by new learning and experience] should help
managers in their strategic deployment of resources and
utilization of capabilities, as well as in their strategic decisions
about which markets the companies should engage with and
disengage with. Moreover, the estimated length of time that their
firms would have to spend in each of the three post-entry periods
would help further guide their management of their resources and
capabilities and allow for the optimal application of the resources
and capabilities.
There are limitations to this study. First, our sample period is
only from 2003 to 2010. Therefore, we do not know whether and
how the S-shaped curve will change over a longer time period. New
studies are needed, based on much longer time horizons, in order
to validate or refute our findings. Second, our findings are limited
to the Polish manufacturing context. We acknowledge that the
potential for learning when exporting may vary across countries. It
would be interesting to examine these relationships in different
contexts in order to be able to account for industry and/or country
specific heterogeneity. For these reasons, we are cautious about
generalizing our findings. However, these limitations notwithstanding, this study stands to contribute to our knowledge about
the effects export experience and alternative market strategies
may have on export performance.
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