AN EXPLORATION OF THE RELATIONSHIP BETWEEN MANAGEMENT
COMMITMENT AND MANAGEMENT ATTRIBUTES WITHIN THE
AUSTRALIAN WINE INDUSTRY
Rumintha Wickramasekera
Charles Sturt University, Australia (rwickram@csu.edu.au)
Abstract
Numerous studies have stressed the importance of management commitment in a firm
initiating or expanding exports. Using structural equation modelling based on a
sample of 292 Australian wineries the model was tested. Results indicated strong
support for two of the hypothesised paths, previous work experience and training in
export matters. These findings indicate the possibility for export promotion agencies
to impart commitment by providing training and information on export matters. The
paper concludes by discussing limitations of the study and suggesting directions for
future research.
1.
Introduction
In the field of internationalisation numerous studies have highlighted the crucial role
of management commitment, managerial attitudes and characteristics in achieving
international success. (See Smith and Zeithaml, 1999; Calof and Viviers, 1995; Calof
and Beamish, 1994; Lim, Sharkey and Kim, 1993.)
Top management with an “international orientation” (Bilkey, 1978) or “foreign
market orientation” (Cavusgil and Nevin, 1981) has been considered an important
factor in explaining the export behaviour of firms. Various management attributes
have been identified as contributing to an international or foreign market orientation.
Brooks and Rosson (1982) considered the type and level of education to be important.
Ethnic background (Simmonds and Smith, 1968), ability to speak a foreign language
(Brooks and Rosson, 1982; Swift, 1991) and the age of the manager (Bilkey, 1978)
were also found to be positively correlated with exporting. However, the importance
of these factors is debatable and it is more likely that this is indicative of other
fundamental managerial attributes such as foreign market knowledge. Other
researchers have emphasised the importance of foreign travel and overseas work
experience (Ford and Leonidou, 1991), which could also be related to foreign market
knowledge.
Some of the other important managerial factors identified are managerial perceptions
of profit and costs (Simpson and Kujawa, 1974) and knowledge in export matters
(Cavusgil and Zou, 1994). Simmonds and Smith (1968), used international outlook
versus national outlook to classify managers while Roux (1979) considers this
difference to be based on perceptions of risk, domestically- oriented managers being
more risk averse than internationally-oriented managers. Cavusgil and Nevin (1981)
found that management expectation that the firm would export was a major factor in
explaining why firms export. Cavusgil (1976) stressed that the interest and
commitment of top management is a critical determinant of export success while
similar views have been expressed by many other researchers such as Aaby and Slater
(1988), Chetty and Hamilton (1993) and in Australia AMC/McKinsey (1993).
2.
Development of Managerial Commitment
Andersen (1993) highlighted the fact that there is no clear explanation of what factors
lead to management commitment. However, some insights can be gained from
Johanson and Vahlne’s (1977 and 1990) models. In their model, market knowledge is
considered to be the starting point of an export venture, though what triggers the
search for this knowledge is not identified.
“... knowledge is of interest because commitment decisions are based on...
knowledge. ... knowledge of opportunities or problems is assumed to initiate
decisions.” (Johanson and Vahlne , 1977: p 38)
Reid (1981) also stressed the importance of managerial knowledge and the factors that
may contribute to this knowledge:
"It would seem that irrespective of the type of factors that leads to the creation
of export stimuli, their recognition and influences on export entry are a function
of managerial knowledge... . ... individual antecedents - such as, type and level of
education, foreign nationality, ability to speak foreign languages, and extent of
foreign travel - are likely to be associated with the exporting decision-maker’s
existing stock of knowledge." (Reid, 1981: p105)
Penrose (in Johanson and Vahlne, 1990) identifies two types of knowledge: objective
and experiential. Objective knowledge can be formally taught, learned by receiving
training. In the context of export behaviour research, objective knowledge could be
gained through tertiary education and training in export matters. These and similar
management characteristics have been identified as important explanatory variables in
determining the export behaviour of firms.
Experiential knowledge can arise from personal experience. This could include
experience gained from working for a company that exported or by having
lived/worked or being born overseas. If this were true, one would expect to find a firm
initiating exports to a country familiar to the manager, that is, a “psychologically
close” country. There is ample evidence in the literature to support this
(Wiedersheim-Paul, Welch and Olson, 1975; Johanson and Vahlne, 1977; Cavusgil
and Nevin, 1981). Therefore, it can be inferred from the literature that management
commitment to exporting is positively related to managerial attributes such as, type
and level of education, foreign nationality, ability to speak foreign languages, and
extent of foreign travel (Reid, 1981).
3.
Research Issues
From the discussion above it is possible to identify a number of research issues.
However, for the purposes of this paper it will be limited to:
H1:
Managerial knowledge based on managerial attributes such as:
H1a : being born overseas (Cbirth)
H1b : having tertiary education (TerEdu)
H1c : having overseas work experience (WorkOs)
H1d : having export training (ExpTrn)
H1e : having worked for a company that exported (WorkExp)
H1f : being fluent in a foreign language (FluFl)
…will have a positive effect on management commitment to exporting.
4.
Methodology
The population for this study included all the wineries in Australia, (ANZIC code
2183) estimated at around 853 in 1996. The Australian wine industry was selected as
the sampling framework, given that this industry operates in a fairly homogeneous
environment enabling the impact of the vast array of usually uncontrollable variables
to be minimises. The survey instrument was a questionnaire, its content, design and
structure based on an item analysis of theoretical and empirical research published
over the previous four decades. The questionnaire was tested and after some
modifications, was administered by post. The sections of the questionnaire relevant to
this study were designed to collect information on managerial characteristics,
including education, overseas work experience, training in exporting, working for a
company that exported, fluency in a foreign language and country of birth.
The questionnaires were targeted at the Marketing Manager of each winery (the key
informant), either to fill out personally or to be directed to the person regarded as
being responsible for the firm's decision whether or not to export. In total, 292 valid
responses were received giving a response rate of over 32 percent.
Mail surveys have been criticised for possible nonresponse bias. In this study methods
proposed by Armstrong and Overton (1977) were used to test for sample bias,
including comparing the values derived for the sample with known values for the
population and the extrapolation method. It was found that the sample is
representative of the population based on these tests.
The data obtained for the study was subjected to Structural Equation Modelling
(SEM). This technique was chosen because SEM explicitly permits modelling with
latent variables by recognising the measurement errors associated with observed
indicators. In short, SEM allows multiple regression analysis of latent factors
(Ullman, 1996). The growing popularity of the method can be attributed to the
following reasons:

it provides a straightforward method of dealing with multiple relationships
simultaneously while providing statistical efficiency

its ability to assess the relationships comprehensively, providing a change from
exploratory to confirmatory analysis. (Hair et al., 1992: p617).
The multi-item measure of management commitment was derived form Cavusgil and
Zou (1994). This measure was tested for internal consistency/reliability using
Cronbach's alpha. Next, the items were subjected to exploratory factor analysis.
Factor extraction was by way of principal-axis factoring method with eigen values set
to 1. Factor interpretation followed a varimax rotation of factor matrix. Inability to
rotate was construed as illustrating the unidimensional nature of the construct. Strict
criteria were applied to attempts at factor analysis. Unless a Kaiser-Meyer-Olkin
(KMO) measure of sampling adequacy exceeding 0.60 was obtained, indicating a
very acceptable level of sampling adequacy, factor analysis was not undertaken. The
results derived from the exploratory factor analysis are reported in Table 1.
Table 1: Factors retained for further analysis
Factor Label
COMMIT
Management
Commitment
 = 0.9608
Variable Labels
Item
Factor
Loadings
PlanExp
MgtComit
ResComit
Extent of planning towards exporting
Management commitment to exporting
Extent of resource allocation to exporting
0.96062
0.96062
0.93515
The next step involved subjecting the constructs to confirmatory factor analysis
(CFA). Tests were conducted to ascertain the effects of any outliers based on the
largest contribution to the normalised multivariate kurtosis (Bentler, 1995). Deleting
the five cases making the largest contribution did not alter the final results
appreciably. They were therefore retained for the analysis.
Issues of “statistical identification” (Byrne, 1994) for the “management commitment”
(COMMIT), containing only three items was addressed by setting the variance of the
factor to 1. Results of the CFA are presented below in Table 2.
Table 2: Confirmatory factor analysis results
Variable Label
Factor label and Items
Factor
Loading
t-value
(Robust)
1.307
1.395
1.254
33.033
35.805
21.077
Management commitment: COMMIT
PlanExp
MgtComit
ResComit
5.
Extent of planning towards exporting
Management commitment to exporting
Extent of resource allocation to exporting
Findings
It was established earlier that an important explanatory variable in determining the
export behaviour of a firm could be explained by certain managerial attributes. Thus,
the next step in the analysis involved testing this relationship. The path diagram used
for the analysis is illustrated in Figure 1. (See appendix 1 for the Bentler-Weeks
symbols associated with SEM used for this study)
Figure 1: Path diagram of management commitment and attributes
To determine the adequacy of the relationship between management attributes and
“management commitment”, several measures were used. Initially the distribution of
the normalised residuals was examined. The distribution was not symmetric and not
centred on zero, suggesting poor specification of the model (Bentler, 1995).
The adequacy of the model was further ascertained using Comparative Fit Index
(CFI), Robust Comparative Fit Index (RCFI) and Mean Root Square of
Approximation. These measures indicated a poor fit for the model. However, once
“Cbirth” was removed and the model re-tested there was an improvement. The CFI
(0.939), RCFI (0.942) and Mean Root Square of Approximation (0.054) indicated a
good fit for the model. However, only the t-ratios between “COMMIT” and
“WorkOs” (worked overseas) and “ExpTrn” (training export matters) were
significant. The Wald test for dropping parameters (Bentler 1995: pp126 -131)
indicated that the parameters illustrated in Table 3 should be deleted.
Table 3: Wald test for dropping parameters
Step
1
2
3
Parameter
COMMIT,TerEdu
COMMIT,FluFl
COMMIT,WorkExp
Chi-Square
0.106
1.123
3.723
D.F.
1
2
3
Probability
0.744
0.570
0.293
Based on the Wald test results and the t-test results, the path diagram illustrated in
Figure 1 was modified by dropping the parameters identified in Table 3. Using the
same method as outlined above, the modified model was re-tested.
The six variables considered important in giving rise to commitment, included the
country of birth, completion of tertiary education, previous work experience, training
in export matters, working for a company that exported and fluency in foreign
language(s). The tests indicated strong support for only two of the hypotheses:
Managerial knowledge based on managerial attributes:
H1c : having overseas work experience;
H1d : having received training in export matters
… will have a positive effect on management commitment to exporting.
All indicators used for determining the adequacy of the model indicated a good model
fit. Comprehensive set of final results is produced below in Table 4.
Table 4: Correlations, means, standard deviations and t-ratios.
PlanExp
MgtComit
ResComit
WorkOs
ExpTrn
COMMIT
Mean
PlanExp
MgtComit
ResComit
1.000
0.898
0.877
0.167
0.412
0.936
2.8385
1.3939
1.000
0.899
0.171
0.423
0.959
3.0928
1.4508
1.000
0.167
0.413
0.937
2.7423
1.3415
SD
* Robust t-ratios in parentheses
WorkOs
1.000
0.000
0.179
0.5018
0.4913
ExpTrn
1.000
0.441
0.3675
0.4754
COMMIT
WorkOs
*
ExpTrn
*
1.000
(3.421)
(8.804)
Figure 2 illustrates the relationship between “having overseas work experience”
(WorkOs) and “having export training” (ExpTrn) and “management commitment”
(COMMIT). It is evident that the relationship is positive and is in agreement with the
hypothesised positive linkage between the independent and dependent variables.
Figure 2: Standardised structural model between management commitment and
management attributes
6.
Conclusion
Numerous studies have stressed the importance of management commitment in a firm
initiating or expanding exports (see Chetty and Hamilton, 1993). However, empirical
evidence is limited regarding the factors responsible for giving rise to this
commitment (Andersen, 1993), though Reid (1981) has argued that the commitment
could derive from managerial attributes. Six variables were identified from the
literature as associated with management commitment. These included the country of
birth, completion of tertiary education, previous work experience, training in export
matters, working for a company that exported and fluency in foreign language(s). The
tests conducted indicated strong support for two of the hypothesised paths, previous
work experience (worked overseas) (H1c) and training in export matters (H1d).
The results have significant implications for export behaviour research as well as for
export promotion agencies. For a considerable number of years the export behaviour
studies have identified the importance of management commitment in initiating and
expanding exports. Several management attributes were considered to impart this
commitment. However, in this study attributes such as the country of birth,
completion of tertiary education, working for a company that exported and fluency in
foreign language(s) were not identified as significant.
On the other hand, training in export matters, and overseas work experience were
found to be quite significant in explaining management commitment to exporting.
These results clearly indicate that what is important is the possession of knowledge
regarding market opportunities and export procedures. The other attributes could be
an indirect indication of possible market knowledge. A similar argument could be
made for the earlier findings that foreign language ability is important. The
completion of tertiary education and working for a company that exported could also
be indirect indications of market knowledge. This is consistent with the findings of
Johanson and Vahlne (1990). However, the results of the current study indicate that
the most direct way to gain knowledge of foreign markets and export matters is
through overseas work experience and/or training in export procedures. This is an
important finding because it indicates the possibility for export promotion agencies to
impart commitment by providing training and information on export matters.
This research has several limitations, suggesting opportunities for future research. The
results of this study are based on a survey of a successful regional Australian industry
- the wineries therefore limiting the potential to generalise the findings to other
industries.
Also in view of the critical and consistently found importance of management
commitment, future research should be directed at an in-depth analysis of what factors
cause one manager to be more committed to exporting than another – not just
associations.
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Appendix 1: Bentler-Weeks symbols associated with structural equation
modelling
.
Representation
Symbol
Unobserved (latent) factor
F
Observed variable
V
V
F
Path coefficient for regression of observed
variable into unobserved factor
F
F
Path coefficient for regression of one
factor into another
.
D
F
E
V
Residual error (disturbance) in prediction
of unobserved factor
Measurement error associated with
observed variable
.
Source: Byrne (1994)
.